Experts in the financial services sector on Tuesday suggested policy direction that could normalise the pressure in the foreign exchange market.
One of the suggestions as was given by Bismarck Rewane, CEO, Financial Derivative Company, was that Nigeria’s Central Bank should accept flexibility of exchange rate.
“A strong naira means a strong economy. Competitive devaluation helps you put yourself stronger. We are going to see a shift to more market-determined naira,” Rewane said.
Another suggestion, which was made by Aminu Gwadabe, President Association of Bureau De Change Operators of Nigeria (ABCON), was that the CBN should make policies that stop cash payment to exiting investors.
“For me, any inflow that is coming in should be attached or to be marched with an escort ‘come with your inflow but when you are going, we are not going to pay you cash’. Take our escort, go to your country and sell it. So we need to put some decisions like this that will bring capital flows and investment. Yes, it is difficult but it is mindset. If we all agree to do it, I think that will go a long way to help the future of naira in 2021,” Gwadabe said.
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He said most of the inflows do not come into the country. They are traded in America and the UK. “The dollar does not come in. people are even saying we do not have inflows, for instance, cash deposit into domiciliary account has become a very difficult thing in the banking industry yet operators are saying they don’t have dollar to pay beneficiaries of diaspora remittance,” Gwadabe said.
Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry, was concerned about the excessive focus on the demand management side of the foreign exchange market. “There is no clear strategy on how to encourage more supply to come into the system”, he said.
Yusuf noted the two major challenges the manufacturers face in the business community as far as currency is concerned – to include the depreciation of the currency, and liquidity crisis in the foreign exchange market.
“When you have a situation where you make a demand for forex either to import equipment or raw materials and you are getting maybe 10 percent or 20 percent of what you have requested, what are you going to do with that. So it is creating a lot of problems, uncertainty in the economy, for investors, it is even escalating the risk of investment,” he said.
Other experts include Charles Robertson, global chief economist, Renaissance Capital, who was the keynote speaker, Akinbamidele Akintola, head SSA equity sales, Stanbic IBTC, and Abiola Adekoya, Lead Wealth Advisor, Artos Capital.
They spoke a virtual meeting on Naira in 2021: Optimising Choices for Growth, organized by Arbiterz in partnership with Cordros, via zoom.
