How Nigeria can diversify foreign exchange earnings – MPC members

Members of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) have highlighted steps that can be taken to diversify the sources of foreign exchange into the country.

“Nigeria needs to diversify foreign exchange earnings from crude oil and portfolio capital because of their inherent volatility,” said Adeola Adenikinju, a member of the MPC.

In Africa’s largest economy, oil and gas accounts for over 50 percent of government revenues and 95 percent of foreign exchange earnings.

Adenikinju, in his personal statement at the last MPC meeting, said Nigeria must explore diaspora remittances and non-oil exports and remove the bottlenecks to non-oil exports.

Customs and related agencies should focus on trade facilitation, and not just maximisation of revenues, he said.

He added that the CBN should mainstream unregistered online transfer channels to Nigeria, and remove bottlenecks inhibiting the seamless remittances of funds by Nigerians in diaspora.

Kingsley Obiora, deputy governor of the CBN, said reducing foreign exchange loopholes through the CBN’s recent measure of e-Valuator and e-Invoicing would enable the central bank to save more forex earnings that would be channelled to the most productive sectors of the economy.

“This will boost local production capacity, promote inclusive growth and sustain a strong naira exchange rate,” he said.

The aim of the recent FX policy measure is to eliminate over-invoicing, mispricing of exports and imports, as well as activities of money laundering.

Read also: CBN’s Infraco engages governments on Apapa decongestion

Aisha Ahmad, deputy director in charge of the financial systems stability directorate of the CBN, said the ongoing initiatives aimed at boosting domestic exports and opening sustainable channels of foreign exchange supply remained imperative.

Mike Obadan, another member of the MPC, said the country’s subsisting production challenges and the heavy importation of refined petroleum products had prevented it from realising visible benefits from the high oil price regime in the form of accretion to external reserves, stability of the exchange rate and boosting of government revenue.

“It is imperative therefore for the government to find lasting solutions to the oil production challenges and continued importation of petroleum products,” he said.

He said the call by some people urging the CBN to resume sale of foreign exchange to the Bureau De Change (BDCs) should be ignored.

The CBN has since July 28, 2021 stopped sale of forex to the BDCs, saying they were engaging in sharp practices.

Obadan said, “One of the reasons for the suspension of forex sales to them was that they were operating like parallel market operators. Official foreign exchange sold to them was off-loaded in the parallel market.

“And so, resuming the sale of forex to them will not bring the parallel market rate down. Therefore, the calls to resume forex sales to the BDCs by the CBN should be ignored.”