- Experts say CBN lacks competence to revive economy
As the country’s revenue continue to dwindle due to declining oil prices, financial analysts have said that there will be no respite for the economy in the near future. They said that the recession currently being experienced would linger till 2017 and beyond. Economic experts also argued that considering increasing pipeline vandalism and terrorism attacks and developments in the financial sector, more pressure will come on the economy and, by implication, operators in the real sectors. Recently, the Central Bank of Nigeria reversed a policy it made in January 2016, when it announced that commercial banks should commence the sale of foreign currency proceeds of international money transfers to operators of Bureau de Change. With the reversed policy, the banks are expected to sell Forex to licensed BDCs, who are like competitors to them. Once supply of foreign currencies, especially dollar is low, due to incessant pipeline vandalism, the development implies that Forex earnings will be very limited and that would pull supply in the market further. CBN IS CREATING CRISIS FOR THE ECONOMY- Experts However, the policy reversal has not gone down well with operators in the banking industry, members of the organised private sector, financial analysts and other key stakeholders. Many of them, who spoke with The Point, argued that while the development might signal the desire of the apex bank to ensure the stability of the Naira exchange rate, the reversal will create a loophole for unlicensed agents to buy from BDCs and ‘hawk’ around or sell to fraudsters for money laundering purposes. Such fear appears to have been fuelled by the structure of the black market where many unlicensed agents parade themselves as legal dealers in the money market as they engage in money laundering. Already, on account of the new policy, findings revealed that a lot of agents have returned to the streets across major cities in the country, claiming they operate BDCs. This immediately saw naira exchange rate against the dollar soar as high as N380/$1.
The concern of many industry watchers and experts is that such policy reversal might have exposed the weakness of the country’s apex bank.
Managing Partner, Nesbet Consult, Dr. Alaba Olusemore, expressed worries that most of CBN’s policies were not well thought out, saying that it is the reason the desired results were not being achieved.
“Interest rate is going up, exchange rate is going up and of course, inflation is also going up. Though, we know all these move in the same direction. As long as there is limited production of oil in the country, export of crude oil would be limited and foreign exchange supply will be limited too and that crash Naira exchange rate further,” he said.
Renowned economist, Mr. Henry Boyo, likened the CBN policy, among others, to the same strategies that triggered the oppressive serial abuse of Naira exchange rate, in the era of former head of state, Gen. Ibrahim Babangida, which later led the country to a steady slide in the rankings of the World’s poorest nations.
“There is no evidence that this level of easy access to public Forex reserves exists anywhere in the world. If 300 registered BDCs enjoy the CBN’s policy, Nigeria’s reserves will fall by almost $300 million monthly. With such development, our emaciated real sector would shrink further, unless good Nigerians everywhere wake up from their slumber and tell the CBN that enough is enough,” he warned.
According to him, various market structures with exotic acronyms, promoted by the CBN, have failed to stop the steady slide of the naira exchange rate, even when oil prices exceeded $120/barrel while Nigeria’s dollar reserves crossed $60 billion.
“A gap of almost N100 now exists between N300/$ C B N / interbank and N380/$ BDC/parallel market rate. The ultimate fate of the naira exchange rate appears blinking,” Boyo added.
Although the Chief Executive Officer, Proximate Consulting Worldwide, Mr. Peter Adebayo, admitted that the initial restriction was meant to serve as a regulatory approach, whether or not it will achieve the target objective is another issue.
He argued that the major problem was the CBN’s inability to exercise effective and pragmatic control, and policy implementation in the financial industry.
“It has been observed over time that there is a fundamental problem with our policy formulation system and model. Apart from the perennial inconsistencies in our policy framework, the poor implementation of the policies that appear good is another hole in the heart of our monetary system.
“The CBN is so confused with the right approach to secure solutions to our problems in this crucial sector of our ailing economy, particularly with the myriad of policy somersaults that have characterised the system. If this persists, the recession will linger beyond 2017,” the Lagos-based financial analyst and management consultant told The Point.
He further noted that operators of the BDCs lack the capacity to control malpractices because majority of them are neck deep in illegal deals. To him, the policy that guides their operations must be objectively implemented.
Adebayo said, “The entire regulatory apparatus of our financial system in Nigeria has suffered and continues to suffer monumental fiasco and except a total overhaul can be carried out in an objective manner, not minding whose ox is gored, we may still be far away from economy rebound.”
Experts are of the view that the CBN, by the new policy on sales of forex to BDCs, may have inadvertently triggered another round of stiff competition amongst the operators for the soul of the customers, whether legal or illegal.
POLICY WILL STABILISE EXCHANGE RATE – CBN
Whether the policy will engender competition in the money market as envisaged remains to be seen but the apex bank insists that the directive, which many banks have not complied with, is part of its efforts to ensure the stability of the Naira exchange rate.
According to a circular by the acting Director, Trade and Exchange Department of the bank, Mr. W Gotring, the decision was to encourage all critical stakeholders to participate in the market.
It said that all international money transfer operators would be required to remit foreign currency to agent banks for disbursement in Naira to beneficiaries.
“The proceeds from the international money transfer sold to the BDCs should be retailed to end users in compliance with the provisions of anti-money laundering laws. The process should be in observance of appropriate Know Your Customer principles, including the use of Bank Verification Number,” it stressed.
Contrary to the allegation that the policy may encourage illegal dealings, the spokesperson of the apex bank, Mr. Isaac Okoroafor, disclosed that failure by any authorised dealers and BDC operator to render returns as at when due shall attract appropriate sanctions, which include withdrawal of dealership.
Okoroafor told The Point that the decision of the apex bank was taken to open the window to enable BDCs service the retail end of the market. According to him, the policy covers only operators buying below $5,000 and it is expected to reduce the pressure on the Naira.
“To resume the suspended aspect of a policy measure does not amount to policy reversal. It serves to ensure that any money remitted to the country is properly accounted for and that we receive real Forex value, instead of just virtual Naira value,” he explained.
It would be recalled that in January 2016, the CBN announced that it had stopped, with immediate effect, the sale of foreign exchange to operators of BDCs, so as to reduce pressure on Nigeria’s foreign reserves.
The CBN Governor, Mr. Godwin Emefiele, therefore directed that the BDCs would henceforth source Forex from the autonomous market.
