CPPE Hails CBN’s Move to Improve FX Supply

todayFebruary 14, 2022

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* Cautions against stopping forex sales to banks
Dike Onwuamaeze

The Centre for the Promotion of Private Enterprise (CPPE) has hailed the latest initiative of the Bankers Committee and the Central Bank of Nigeria (CBN) to deepen the supply side of the foreign exchange market through the RT200 as welcomed initiative.

An Economist and Chief Executive Officer of the CPPE, Dr. Muda Yusuf, said yesterday in a statement that the RT 200, which “seeks to attract $200 billion inflow exclusively from non-oil exports over the next three to five years is a laudable aspiration even though ambitious.”

The CPPE, which is a business and economic advocacy think-tank, noted with commendation the five key anchors of the policy, which are value adding export facility, non-oil commodity expansion facility, non-oil export rebate scheme, non-oil export terminal financing and bi-annual non-oil export summit.

Yusuf added: “The CPPE commends the new focus of the CBN on supply side strategy. The reality is that supply side policies are even more critical and impactful than demand management interventions in the foreign exchange market.
“Over the last couple of years, the CBN has been fixated on managing the demand side of the foreign exchange market and the outcomes have been suboptimal.”

He, however, drew the attention of the bankers’ committee and the CBN to what he termed the critical success factors for the RT 200 initiative.

One of these critical factors, according to him, was that the structural issues vital for driving the growth and competitiveness of non-oil exports were not within the limits of the CBN or the bankers committee but within the domain of the fiscal authority.

He said: “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 realisation 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.”

He also pointed out that the current pricing regime on the importers and exporters’ (I & E) window of the CBN’s forex market was at variance with the objectives of the RT 200 and would 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 penalises exporters and it is a major demotivating factor to investment in the non-oil export sector.

“Therefore, 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.”

He, therefore, called for the relaxation of regulations around export proceeds in the spirit of the RT 200.
Yusuf said: “Exporters must be able to sell their proceeds at a mutually agreed exchange rate to either the banks, importers or the BDCs as the case may be. The apex bank should institute a willing buyer-willing seller framework for export proceeds.”

He, however, cautioned the central bank to be wary of stopping the sales of foreign exchange to commercial banks.
Yusuf said: “The CPPE would like to caution that the apex bank should rigorously think through this proposition before implementation because of the likely systemic shocks, business disruptions, macroeconomic dislocations and weakening of investors’ confidence. A much deeper and robust I & E forex window should be in place before the CBN can contemplate a termination of its forex market interventions.”

Yusuf also called on the central bank to expand the scope of its new the forex supply strategies and incentives to cover other sources of foreign exchange inflows into the economy.

These sources, according to him, include Foreign Direct Investments (FDIs), Foreign Portfolio Investments (FPI), Diaspora remittances, diplomatic missions in the country, development partners, multilateral agencies, oil companies, international aid agencies and donor agencies.

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