By Adewale Sanyaolu
In his reaction, Director General, Lagos Chamber of Commerce and Industry (LCCI),Mr.Muda Yusuf, in a statement made available to Daily Sun commended the Central Bank of Nigeria(CBN) on the adoption of flexible exchange rate regime.
The Chamber maintained that the policy choice would improve efficiency of foreign exchange allocation in the economy while reducing the distortions that currently characterise the forex market and bring the economy closer to equilibrium.
The chamber posited further that the policy stance of the CBN would improve liquidity in the foreign exchange market with a reduction in the current trade arrears and remittances which had accumulated in the past 18 months.
It assured that the introduction of the flexible regime would reduce uncertainty which investors have been grappling with over the last one year while boosting investors’ confidence and attract greater forex inflows to the economy.
On monetary policy, he said the chamber welcomes the decision of the CBN to refrain from further tightening of monetary policy at this time.
The current context is that the economy has been declining. The Gross Domestic Product (GDP) has contracted for the first time in twelve years; unemployment is on the rise; manufacturing capacity utilisation has been weakening; and investor confidence has been at its lowest ebb. The decision not to tighten monetary policy is therefore appropriate.
However, as the CBN articulates the framework for the new forex regime, we propose that due consideration should be given to a transparent forex market which guarantees level playing fields for all investors.
‘‘Need for clarity on what the CBN describes as a special window for critical transactions for which preferential rates will apply. We would like to caution against possible abuse and distortions that such a window could create. It could pose a risk to the entire system. We would like to be assured that the window for the critical transactions will be managed transparently and in a manner that it will not create distortions in the economy,’’ the chamber said.
Also reacting on MPC decisions, the Managing Director of Cowery Asset Management, Johnson Chukwu, commended CBN for maintaining the rates for the stability and growth of the economy.
He stated that under the current challenging economy conditions where there are severely weakened macroeconomic environment, including increased inflationary pressure, contraction in real output and rising unemployment, any movement, or change would worsen the economic situation.