CBN may review forex rules as it meets with Bank CEOs

The Central Bank of Nigeria (CBN) would probably revise some of the measures it has put in place to checkmate the volatility of the naira at its meeting with banks’ chief executives and their treasurers today.

Some of the foreign exchange rules that stakeholders believe the apex bank may review are those inhibiting the availability of forex.

The CBN meeting with the bank chiefs will  centre on issues surrounding its policies at the foreign exchange market. Whereas the spokesman of the apex bank, Ibrahim Mu’azu denied awareness of such a gathering, the President, Association of Bureau de Change of Nigeria (ABCON), Alhaji Aminu Gwadabe called on the apex bank to revise its policy that restricts banks from selling forex to dealers as this has caused scarcity in the market.

He also urged the CBN to make forex more accessible to commercial lenders, saying bankers have been complaining bitterly that their forex demands are not being meant, which has been hampering their businesses.

“Although the CBN closed the rDAS and wDAS to checkmate round-tripping, this has made a lot of banks to be unable to meet the forex demands of their customers,” he said.

The Chief Ecomonist, Manufacturers Association of Nigeria (MAN), Mr. Ambrose Orushe told Hallmark that the CBN has to revisit its policy for preventing exporters from having unfettered access to their export proceeds.

He faulted the apex bank for dictating what these exporters could do with their proceeds, saying they should be allowed to have unhindered access to their domiciliary accounts.

For an Economics lecturer with Lincoln University, California, USA, Dr. Richard Mayungbe, mopping up excess liquidity in the economy by manufacturers is limiting access to credit.

He opined that this would strengthen the nation’s currency; adding that the apex bank must retain its policy on repatriation of export proceeds.

“There is need for the CBN to direct airlines to also repatriate their forex proceeds. And the National Assembly must enact a law that would control reckless spending of the country’s foreign reserves for whatever reason,” he argued.

He called on the government to take a look at the huge amount of forex Nigerians spend on overseas education and medical tourism, which have been weakening the naira.

The CBN has in recent times taken different measures in a bid to stabilize the naira.

In February the apex bank shut the Retail Dutch Auction System (rDAS) and Wholesale Dutch Auction System (wDAS), directing all forex transactions should go through the interbank market, saying this was done to curtail unwholesome practices in the forex market.

After then the CBN also threatened to prosecute those dollarizing the Nigerian economy by collecting dollar for rent and school fees.

Before setting the restrictions, the central bank had been battling to prop up the naira after a sharp fall in the price of oil, Nigeria’s main export, which triggered a sell-off in assets by foreign investors.

The central bank also fixed the rate at which banks can buy dollars from oil companies.

Traders were upbeat on the outcome of the meeting which they claimed was long overdue to ease the tight control in the market and allow the local currency to find its real value.

“We are anticipating that the meeting would naturally discuss the present market conditions and explore possibility of reviewing the tight control on the forex market,” one senior treasurer told Reuters.

JPMorgan had threatened to eject Nigeria from its Government Bond Index (GBI-EM) by the year-end unless it restores liquidity to currency markets in a way that allows foreign investors tracking the benchmark to transact with minimal hurdles.

Nigeria’s central bank set its exchange rate peg at 198 to the dollar in February but  changed it to 196.90 naira against the dollar last week, with dealers saying the tweaking was not a reflection of the market.

The restrictions included central bank plans to limit the amount commercial bank customers can spend using their debits cards while abroad in a crackdown on dollar demand to save its dwindling foreign.