Prof Collier, Bankers seek to unshackle Nigeria’s FX market to grow economy

Senior bankers have joined the Oxford university professor, Paul Collier in calling on the Central Bank to relax its hold on the importers and exporters foreign exchange window as a way of easing Nigeria’s foreign exchange demand backlog now estimated at over $2.5bn.

Businessday learnt that the backlog is giving the bankers sleepless nights as they struggle to appease their correspondent banks abroad that have taken a dim view of the way Nigeria is managing its foreign exchange market.

The I&E window has long been acclaimed as a major breakthrough in the country but the initial enthusiasm has dissipated because of what many believe to be an attempt by the apex bank to manage what happens in the market.

According to one senior banker who spoke to our reporter in Lagos, “the reason we have this backlog is because you have one major player (CBN) which determines what happens in the market. Free the market, don’t constrain it,” he said.

Our reporters learnt that during Tuesday’s bankers committee meeting, the CEO of GT Bank Segun Agbaje was mandated to lead a small team to come up with how the foreign exchange backlog can be swiftly resolved without harm to the economy.

More than a month ago, the central bank moved the official rate from N306 to the dollar to N360 but many believe this still leaves much to be desired given that the I&E rate which best mirrors the market rate is at N383.

There were suggestions Wednesday that this rate could move closer to N385 but no one is sure when this will happen.

Speaking at the on-going Businessday national conversation, the Oxford university economist Paul Collier said Nigeria is damaging its own economy by maintaining multiple exchange rates and by seeking to allocate foreign exchange.

According to Collier, “it is really damaging when the central bank starts to allocate foreign exchange through multiple exchange rates.

“Unifying the exchange rate around a level that works for everybody is both urgent and important now,” the leading economist said on the panel that also included finance minister Zenaib Ahmed.

According to the professor, “you cannot keep kicking the can down the road in the hope oil price will come again.”