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LCCI urges CBN to remove FX restrictions on 43 items

LCCI to boost intra-African trade at international fair

The Lagos Chamber of Commerce and Industry (LCCI) has urged the Central Bank of Nigeria (CBN) to remove the foreign exchange restrictions for importing 43 products in their list.

This was revealed at the chamber’s quarterly State of the Economy event in Lagos on Tuesday.

Speaking at the event, Michael Olawale-Cole, president of LCCI, said the CBN should also communicate the new framework for exchange rate management and enhance the consistency of the current framework for monetary policy operations to ensure price stability.

“This is critical to enhancing stability, liquidity, and transparency in the fx market,” he said.

According to Olawale-Cole, the naira exchange rate stood at N771.5/$ as at July 13, 2023, and at the Bureau De Change (BDC) segment, the naira depreciated to N762.3/$ in June from N750.8/$ in March. “The BDC rate currently sells at an average of N811/$.”

He added that the emerging gap between the official rate and the BDC rate may be attributed to several factors, including fx liquidity issues at the nafex window, pushing economic agents into the parallel market, and the continued fx restriction for the 43 items in the cbn list of fx restrictions.

Last month, the CBN collapsed all segments of foreign exchange markets into the Investors and Exporters (I&E) forex window.

It directed deposit money banks to remove the rate cap on the naira at the official I&E market, to allow for a free float of the national currency against the dollar and other global currencies.

Read also: How Nigeria can revive ailing economy, says NECA

This was aimed at unifying and adopting a market-responsive exchange rate, according to LCCI.

“Based on the adjustment, the rate rose to N742.3/$ from N463.38/$. With the devaluation, the naira exchange rate continued to record a disturbing fall in q2. It averaged N635.1 in June at the official market, from N460.9/$ in March,” it said.

The chamber said the floating of the naira exchange rate could lead to a further rise in the country’s inflation rate which rose to a new 17-year high of 22.79 percent in June from 22.41 percent in the previous month.

“The inflationary pressures were primarily attributed to high food and energy prices, housing, clothing & footwear, transport and imported inflation. We foresee a further rise in the inflation rate in the near term due to subsidy removal and the floating of the naira exchange rate,” it said.

According to the chamber, increasing the monetary policy rate has, thus far, proven to be ineffective and insufficient in taming inflation.

“Therefore, there is a clear need for the government to strengthen its support to critical sectors like agriculture, power, energy etc. It should also look at ways to improve supply chains as well as cushion the cost of production.”