LCCI sees CBN’s policy widening exchange rate differential

The Central Bank of Nigeria’s (CBN) ban on 41 items will likely widen the exchange rate differential between the inter-bank and parallel mar- kets, according to the Lagos Chamber of Commerce and Industry (LCCI).

The CBN had, last week, announced the restriction of importers of 41 items from accessing the Nigerian foreign exchange to grow local production, cut down pressure on foreign reserves and create domestic jobs.

But LCCI says this will create market differential that will in turn induce rampant round tripping of foreign exchange, which the apex bank has limited capacity to curb.

The chamber says the alternative forex markets – parallel market and the BDCs – are not deep enough to meet the demands of the essential intermediate prod- ucts on the exclusion list, stressing that the exclusion of the items from the forex market is as good as import prohibition.

It adds that many of the products on the list are in- termediate goods, which are critical inputs for many manufacturing firms and other critical sectors of the economy.

“This development will put several investments at risk with implications for job losses, quality of loan assets in the banking system and the welfare of citizens,” a statement signed by Remi Bello, president, LCCI, says.

“Examples of these are iron rods, cold rolled sheets, wire rods, reinforcing bars, poly- propylene granules, glass and glass ware,” Bello says, adding that the construction, real es- tate, fabrications and housing segments of the economy will also not be spared.

“A painstaking gap analy- sis to determine the domes- tic capacity for production vis a vis the demand should have preceded the policy de- cision by the CBN,” the LCCI boss says, advocating that the policy should be put on hold pending a proper study of the demand and supply gaps in the various sectors affected by this policy.

He further says the CBN should focus more on the market fundamentals and must allow market mecha- nism to drive the allocation of foreign exchange.

“The closer the rate is to equilibrium the better for the economy and less dis- ruptive for investors,” he ad- vises, and advises President Muhammadu Buhari to urgently set up its economic team and constitute its cabi- net to give a clear direction to the economy.

ODINAKA ANUDU