CBN Gov, Peterside differ on forex policies

Ebun Francis

Governor of Central Bank of Nigeria, Mr. Godwin Emefiele and the Chairman, Stanbic IBTC Bank Plc, Mr. Atedo Peterside, on Thursday at the 14th Daily Trust Dialogue differed on on the success of the flexible foreign exchange policy in addressing the foreign exchange challenges in the country.

Mr Atedo Peterside , claimed that the foreign exchange and demand management policies of the Central Bank of Nigeria have failed and have not achieved the needed impact owing to the fact that it is not market-determined, Emefiele, however, countered this position, insisting that the nation’s foreign reserves were being depleted at an unprecedented rate, explaining that CBN’s policies represented measures taken to protect the interests of Nigerians.

The Stanbic IBTC chairman went ahead to state that there are 11 major economic steps that the government needed to take to address the economic problems and they  are correcting the imbalance in the foreign exchange policy, making peace with the Niger Delta militants, sale of some national assets, deregulation of entire downstream petroleum sector, reduction of bloated civil service, and making states economically viable.

Others are addressing deficit in infrastructure, improving the nation’s legal system, respect of rule of law by government, restoring business confidence and appointment of directors to the boards of every regulatory agency of government.

According to Peterside, the more the restrictions placed on forex repatriation by CBN, the less likely it has become that the badly needed forex inflows from portfolio investors, foreign direct investors and Nigerians will pick up.

HE also claimed that the CBN had inadvertently created a siege mentality, thereby making privileged access to its forex allocations, which are reserved largely for the politically well-connected, the best investment game in town.

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“The directive to banks to allocate 60% of forex to manufacturers who account for only 10% of GDP has exacerbated an already bad supply situation.,” he said.

“Forty percent is much too small to accommodate the rest of the economy and so all other sectors have been crippled, including the service sector, which accounts for over 50% of GDP.

“This has unleashed panic, thereby sending the parallel market to the high heavens. Forex inflows disappeared partly because of the uncertainty surrounding the ability to repatriate interest/dividends through an overly restrictive 40% window.

“There is nothing magical about 60% or 40%. It has no ‘scientific’ basis. Meanwhile it has huge adverse distortionary implications on the supply side. The end result has been our mind-boggling and widely divergent multiple exchange rates, which have spooked investors who have taken fright and also taken flight.

“Sadly, we have effectively ‘shot ourselves in the foot’ by taking unsustainable actions that crippled both forex inflows and the service sector, whilst favouring even those manufacturers who own ‘zombie’ industries that are horribly import-dependent.

In his response to Atedo Peterside, The CBN boss informed the gathering that policies are not made in isolation. ”Explaining that policy challenges are usually multi-dimensional, Emefiele stated: “For us  policy makers, we are faced with low oil prices with heavily depleted foreign reserves.  What can we do? We can only continue to prioritise our needs. Our priority today is Nigeria and Nigerian market and we will continue to do our best.

“With the limited resources at our disposal, we will continue to give forex to those that want to import raw materials that we cannot produce in the country.

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“We will give emphasis to those that want to import plants and equipment that will help this country. We will give support to those who are going into agriculture, importing agric raw material and implements.

“I will say that some of the 11 points raised by Atedo Perterside are contestable but it is very important that we talk from the stand point of understanding of the reason why certain policy decisions were taken.

“Policies are not made in isolation, they are made because certain  things have happened and with some objectives in mind with desire to ensure that those objectives are achieved.

“I will disagree with some of his points. But I think, it is very important that before we make conclusion, we should cast our minds back on why these policies were made rather than criticizing them.

“We will look at the points, some of them we will take. I will find time so that we  can share why some of those policies were put in place.

“We love our country and we will not do anything wrong to our country. We are willing to dialogue and understand where challenges are coming from.

“Government is doing its best in the face of the global economic challenges. We will not head in the way of Venezuela and Zimbabwe. We will work together for Nigerians because we love our country.” Emefiele concluded.

Other speakers at the event include the speaker of the House of Representative, Hon Yakubu Dogara, Minister of Finance, Mrs Kemi Adeosun and Chief Philip Asiodu.