Last June, when the Central Bank of Nigeria (CBN) bowed to pressures and implemented a floating foreign exchange regime in place of the hitherto held fixed, its Governor, Godwin Emefiele, assured all that the step would end the nightmarish experiences associated with sourcing FX, particularly the US Dollar for off-shore transactions, as the flexibility of the newly adopted regime would increase participation of other stakeholders in the supply chain.
However, six months down the line, and following the implementation of the floating regime, it appears the scheme may have created more problems and pains than it set out to address.
If feelers from stakeholders and FX experts interviewed by The Guardian are anything to go by, the situation has seriously degenerated. Henry Boyo, a renowned economist said the situation would continue to deteriorate until CBN’s overbearing and monopolistic presence in the market is abrogated.
He explained that the Apex bank supplies 80 per cent of the dollar needs in the market, hence its continued distortion and control of the market, which makes it unattractive to other suppliers, with the attendant rent-seeking and round tripping clusters the development has created due to scarcity.
Indeed, a commentator has said there are currently 11 different Naira/Dollar exchange rate regimes in the country. He attributed this to continued scarcity and CBN’s dominance of the market. He listed the different rates as follows:
Pilgrims rate, N197/$; Customs rate, N285/$; Budget rate, N305/$; Interbank rate, N315/$; Fuel Imports rate, N316/$; International Card rate, N319/$; Travelex rate, N345/$; Special Funds Airlines rate, N355/$; Western Union rate, N375/$; BDC rate, N399/$ and the Black Market rate, N492/$.
Boyo, however, said the panacea to creating a competitive FX market in Nigeria lies in CBN’s withdrawal from the market. “Once the CBN’s monopoly on the foreign exchange market is removed, there will be a much more harmonious exchange rate regime. The idea is to ensure that the Naira is given a better chance of survival by modulating the quantum of its supply in the market against that of the Dollar,” he said.
Prof. Olu Ajakaiye, also an economist and former Director General of the Nigerian Institute for Social and Economic Research (NISER), and currently the Chief Executive of the African Centre for Social Development, attributed the foreign exchange crisis to scarcity of foreign exchange inflow. He advised that concerted efforts be undertaken to ensure that inflows of FX returns to the country.
Ajakaiye listed some of the ways to achieve this to include, sustained peace efforts at the Niger Delta region, which would boost production of crude oil; massive investments in power to encourage more investment in the industrial sectors, as well as the return of industrial entities, which moved away from the country, as a result of poor electricity supply.
This, he said, will reduce the demand for imported goods, which would now be manufactured locally. He also advocated re-beefing the Nigerian foreign reserves to create confidence and attract portfolio investors, who would bring foreign exchange into the country.