By Bimbola Oyesola
Despite the volatility in the foreign exchange market and challenges posed to the manufacturing sector, members of the Organised Private Sector (OPS) are optimistic of the ability of the new forex policy to save the economy.
The Director General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, said that the new forex would engender liquidity through the ease with which players could trade forex at the market.
Among others, he opined that it would “reduce the uncertainty that characterized the foreign exchange market; Provide better transparency and equity in the allocation of foreign exchange; Bring dastic reduction in parallel market premium which reduces the incentives for round tripping and other sharp practices; initiate better deal for exporters as access of the export proceeds is better.”
He noted that the CBN through the new policy has substantially cleared the backlog of remittances, though he said there were concerns about the rate at which the backlog of remittances were cleared.
He said: “These are some of the expectations from the new forex policy and quite a great deal of these have been achieved. But as with many economic policy choices, it will take some time to stabilize and for the expectations to be substantially met. The policy is less than one month old. It is difficult to rebuild in one month what has suffered a setback for 18 months. As the confidence in the policy and the economy grows, the situation will progressively stabilize. It is confidence that would boost the inflow of forex from autonomous sources such as capital importation, export proceeds and diaspora remittances.”
As part of the way to sustainability, Yusuf explained that it is critical as well to fix the militancy issues and attacks of oil installations in the Niger Delta, bearing in mind that oil production has profound implications for foreign exchange earnings and exchange rate stability.
He maintained that it is clear that the current forex policy was a major improvement over the former forex policy driven by administrative allocation of forex, stressing that it makes sense to give it time and regularly fine tune it as circumstances demand, without compromising the basic principles of market principles and transparency.
Yusuf however warned that the decision by the Nigeria Customs Service to use prevailing exchange rate to compute import duty would further put pressure on operating cost of business.
“Already business are grappling with energy cost, high transportation cost and a sharp depreciation in exchange rate. The decision on the use of prevailing exchange rate needs to be revisited”, he said.
The Nigeria Employers Consultative Association (NECA), Director General, Segun Oshinowo equally submitted that it is a good policy though yet to add any significant impact to the economy.
He reasoned that thought cost of goods has increased, but maintained that the inflationary impact would be more easier to handle that. non availability of forex as experienced in the past.
He added, “It’s one policy that has been delayed, but am so happy that government is beginning to see the sense in allowing some partial floating of the currency. So that our currency can attain it’s appropriate value. But the question people will ask is that what is the advantage in that, because certainly this flexible foreign exchange disposition is going to lead to official depreciation of the value of the naira. But we shouldn’t look at the loss of purchasing power which that will foist on Nigerians. We should equally not look at the upside of inflow of capital to Nigeria by foreign investors. Because many foreign investors have actually suspended key decisions on investments in Nigeria, until they are cleared what the duration of Nigeria foreign exchange would be in terms of the value of the naira. Having tidy that policy now, I think we are likely to experience what I considered to be positive inflow of investment into our economy, which is extremely important to promote growth and provide jobs for our youths.”