Emefiele’s forex policies not working — Lawmakers

…set to probe weekly sales of forex to BDCs, banks

BY ODUNEWU SEGUN

LEGISLATORS at the lower chamber of the National Assembly, House of Representatives, have expressed their dissatisfactions with the forex policies of the Central Bank of Nigeria, resolving to probe the CBN on the sales of forex to Bureau De Change operators and banks at a subsidized rates.

National Daily gathered in the resolution reached after adopting a motion by Rep Ali Isa (PDP, Gombe), the House said the ad-hoc panel would hold an interactive session with the CBN to obtain the list of establishments issued with foreign exchange at subsidized rate from between last year and this year.

The panel would also interact with the operators of Bureau De Change (BDCs), banks and other financial institutions that received foreign exchange directly from the CBN to give detailed explanation of how they utilized the forex.

Additionally, the ad-hoc panel would recommend appropriate measures that could stabilize the forex market in Nigeria with a view to strengthening the naira and report back to the House within six weeks.

The House said the lingering scarcity of forex in the capital market has continued to weaken the naira against other foreign currencies, especially the dollar, which in turn affected the prices of goods and services in the country.

The lawmakers said despite the claims by the CBN that it issued forex directly to BDCs and banks weekly, the naira was going down every day.

Much controversy has trailed the Central Bank of Nigeria’s (CBN) foreign exchange policy, especially the inconsistencies, leading to high speculations and eventual crash of the naira.

It started with the pegging of the naira at 197-198 to the dollar despite public outcry against the policy, the CBN insisted. In June this year, the CBN moved the country away from a fixed exchange rate regime, to one that reflects market forces.

While the debut of the new policy has been imbued with controversy, especially as regards to its effectiveness, it is unclear what analysts regard as an effective exchange rate policy.

The CBN also halted the official sale of dollars to the BDCs and non-bank operators, earlier this year, opting instead for commercial banks, accusing the BDCs of excessive greed and rent-seeking practices. Few months later, the CBN made another 360 degrees turn, reinstating the BDCs. This time, Godwin Emefiele, Governor of the CBN cited the need for BDC operators to provide window for Nigerians in the Diaspora to remit money back home to help boost the country’s economy.

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Exchange rate volatility makes it difficult for individuals, businesses and investors to plan. People adopt a wait-and-see attitude, believing that the rate is yet to attain market-clearing equilibrium. Those who remit money from abroad, such as Nigerians in the Diaspora, would postpone remittances, causing a short-term fall in the supply of foreign exchange.

Similarly, foreign businesses would postpone business transactions in Nigeria, following uncertainty in the foreign exchange market. Speculators will continue to hoard foreign currencies (and depleting supply), while those awash with Naira would mop up whatever foreign currencies they could find thereby exerting pressure on demand.