Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), during the press conference after the bankers committee meeting last week, hinted of the imminent stoppage of dollar sales to banks, of which analysts have called for a rethink before implementation.
If the intended decision is implemented, it will likely result in systemic shocks, according to Muda Yusuf, chief executive officer of The Centre for the Promotion of Private Enterprise (CPPE).
Other implications include business disruptions, macroeconomic dislocations and weakening of investors confidence.
“A much deeper and robust Investors and Exporters (I&E) forex window should be in place before the CBN can contemplate a termination of its forex market interventions,” Yusuf said.
The CPPE welcomed the latest initiative of the Bankers Committee and the Central Bank of Nigeria (CBN) to strengthen and deepen the supply side of the foreign exchange market through the RT 200 programme.
The RT 200 seeks to attract 200 billion dollars inflow exclusively from non oil exports over the next three to five years. “Though ambitious, the aspiration is laudable nonetheless,” Yusuf admitted.
In a note sent to BusinessDay, the CPPE drew the attention of the Bankers Committee and the CBN to the critical success factors for the RT 200 initiative.
It stated that structural issues are very vital for driving the growth and competitiveness of non-oil exports. Structural variables are not within the purview of the CBN or the Bankers Committee.
The fiscal authorities have much bigger roles to play in fixing the structural constraints which have been impeding non-oil exports productivity and competitiveness for decades.
Therefore, collaboration with fiscal authorities is a critical success factor for the realization of the RT 200 outcomes.
“It is impossible to clap with one hand. Complementarity between the fiscal and monetary authorities is therefore imperative for the success of this scheme,” Yusuf reiterated.
Read also: CBN plans to drive $200bn non-oil exports
The current pricing regime in the Importers and Exporters [I & E] window of the foreign exchange market is at variance with the objectives of the RT 200, he said.
It will be a major impediment to the achievement of the Race To $200 billion Export Proceeds Vision. Exporters are currently not encouraged to remit export proceeds at the current official rate of N416/$. It is a pricing regime that inherently penalizes exporters and it is a major demotivating factor to investment in the non oil export sector.
Therefore, he said the CBN should take urgent steps to ensure that the exchange rate regime in the I&E window is market reflective. The pricing regime should be flexible and reflect the demand and supply dynamics. This is the biggest incentive that the apex bank can give to the non-oil Export sector. It will be more impactful than any rebate that the CBN could be contemplating.
According to the CPPE, exporters in the economy must be allowed unfettered access to their exports proceeds. The current policy regime on export proceeds is stifling, restrictive and repressive. It is inhibiting export initiatives, enterprise and growth.
Regulations around export proceeds should be immediately relaxed in the spirit of the RT 200. Exporters must be able to sell their proceeds at a mutually agreed exchange rate to either the banks, importers or the Bureau De Change (BDCs) as the case may be. The apex bank should institute a willing buyer-willing seller framework for export proceeds.
It further advised that the CBN should expand the scope of its new the foreign exchange supply strategies and incentives to cover other sources of foreign exchange inflows into the economy.
These sources include: Foreign Direct Investments [FDI], Foreign Portfolio Investments [FPI], Diaspora Remittances, Diplomatic Missions in the country, Development Partners, Multilateral Agencies, Oil companies, International Aid agencies and Donor Agencies. Inflows from these sources should be completely liberalised through a market driven I&E window.
Current regulatory regime for inflows is obstructive and inhibiting. The CPPE recommended that foreign exchange generating MDAs should be encouraged to sell their Forex at the I&E window at a market reflective exchange rate. Some of these agencies include the Nigeria Ports Authority [NPA] and the Nigeria Maritime Administration and Safety Agency [NIMASA].
