The Nation Newspaper

Tag: Flexible forex policy

  • CIBN boss harps on gains of flexible forex policy

    The President, Chairman of Council, Chartered Institute of Bankers of Nigeria (CIBN), Prof. Segun Ajibola has praised the Central Bank of Nigeria (CBN) for introducing the flexible foreign exchange policy.

    Speaking during the 2016 Annual Bankers’ Dinner held in Lagos, he said, the policy would provide optimal solutions to the exchange rate challenges facing the country.

    He said Nigeria has also had its fair share of social and economic challenges in 2016. “The forex market continues to be stretched with the Naira exchanging to the dollar at a rate above 300 and 450 in the official and parallel markets respectively. Inflation rate increased to 18.30 per cent in October of 2016 while businesses continue to grapple with the not-too-encouraging operating environment,” he said.

    Ajibola explained that as a major stakeholder in the Nigerian project, the Institute engages with players in the industry and other allied sectors to support government and regulatory institutions’ efforts at addressing challenges facing the economy.

    On the need for competent workforce in the banking industry, the CIBN boss said the central place of the banking and finance industry in the economic value chain requires a workforce who are not only well-trained in the technical aspects of the profession but have also imbibed the softer skills of high ethical standards and unimpeachable professional conducts.

    “The syllabus of our Compulsory Continuing Professional Development (CCPD) programme was therefore not only developed to fill the needed skills and competencies gap in the industry but it is constantly being reviewed to remain cutting-edge. The Institute is also playing a central role in the Central Bank of Nigeria’s Competency Framework in the industry as the sole accreditation agency. As at date, eight bank academies have been accredited,” he said.

    Speaking on the state of the economy, he said this year has been awash with mixed feelings both at the global level and the domestic space. “At the beginning of the year, several projections were made and palpable apprehensions filled the air on the not-too-promising global economic outlook. As events unfold, some of these projections and apprehensions were confirmed while other events which defy experts and analysts’ forecasts continue to redefine the theory and practice of global politics and business,” he said.

  • Flexible forex policy narrows trade deficit

    Flexible forex policy narrows trade deficit

    •DMO to raise N120b from local market

    Nigeria’s trade deficit narrowed in the  second quarter following increased exports in June, a report has said.

    It was boosted by the Central Bank of Nigeria’s (CBN’s) unveiling of the flexible foreign exchange policy, the National Bureau of Statistics (NBS) data have shown.

    However, the feat was not enough to help the economy avoid a recession. The economy entered a recession in the second quarter, after persistent low oil prices hammered vital public finances and the naira, prompting foreign investors to flee bond and equities markets.

    This caused chronic dollar shortages.

    The Debt Management Office (DMO) will be issuing N120 billion ($387 million) in local-currency denominated bonds at an auction on September 14.

    The debt office said it will raise N40 billion each from debt maturing in 2021, 2026 and 2036, using the Dutch auction system. All the bonds are re-openings of previously issued debt. Nigeria has estimated it will borrow around N900 billion from the local debt market this year to fund a budget deficit projected at N2.2 trillion.

    The CBN floated the naira in June to ease dollar shortages and preserve its dwindling reserves. It allowed the naira to tumble 30 per cent on the day of the float from its 16-month pegged rate of 197 per dollar.

    The currency move helped Nigeria’s trade balance gain some ground to stand at minus N196.5 billion in the second quarter, the NBS said from minus N351.3 billion in the first quarter.

    “The improvement in export value is largely due to the depreciation in the value of the naira,” it said in a statement. “This development arose from a rise of 63.3 per cent in the value of exports largely due to exchange rate gains combined with a rise of 38.1 per cent in the value of imports against the levels recorded in the preceding quarter.”

    The naira has since lost 16 per cent since June on a lack of hard currency liquidity and as foreign investors stay on the sidelines, leaving the central bank as the main supplier of dollars.

    Total trade between April and June stood at 3.94 trillion naira, up 49 percent from the three months to March. The NBS said exports were dominated by crude oil, which contributed 79.7 percent of total exports of 1.87 billion naira. Imports rose 38.1 percent in the second quarter to 2.07 billion naira.

  • Flexible forex policy still on trial – Emefiele

    Flexible forex policy still on trial – Emefiele

    The flexible exchange rate inter-bank market policy being implemented by the Central Bank of Nigeria (CBN) is still on trial and would soon make room for more stakeholders including Bureaux de Change (BDC) operators to participate, the CBN governor, Godwin Emefiele, has said.

    Speaking during an interactive session between the BDCs and CBN  on the new policy and state of the forex market on Wednesday, Emefiele said all hopes to include BDCs in the policy guidelines is not lost, while also acknowledging the impact of the policy on BDC businesses.

    The broad framework and guidelines on the policy was released by the CBN on June 15 during which it restored the automatic adjustment mechanism of the exchange rate with the re-introduction of a flexible inter-bank exchange rate market.

    The apex bank said the workings of this market will be consistent with its objectives of enhancing efficiency and facilitating a liquid and transparent foreign exchange market.

    Emefiele, who was represented by CBN Director, Financial Policy and Regulation Department, Anthony Ikem, said, “The CBN wants to accommodate and carry all stakeholders along. All that management is requiring for the BDCs is to be more patient. The new policy is being tested. Efforts will be made to see how the BDCs, which are critical to economic development, will be carried along.”

    The CBN governor promised the operators that they will be part of the policy, adding that more collaboration between the regulator and operators is needed to move the economy forward.

    He said the CBN will review the BDC operational guidelines to ensure they are in line with regulatory requirement and prepare the operators for the task ahead.

     

  • Flexible forex policy: Energy prices, Customs duties to go up

    Flexible forex policy: Energy prices, Customs duties to go up

    • Consumers prepare for hard times

    The flexible foreign exchange policy implementation which started on Monday will see energy prices and Customs duties go up immediately, the Managing Director/CEO, Tempo Paper & Packaging Limited, Seun Obasanjo, has said.

    He said consumers of local goods should prepare to absorb a minimum of 15 per cent rise in cost of products, as higher cost of energy and Value Added Taxes (VAT) are incorporated into the prices of goods.

    He said with the new policy, people’s purchasing power has been eroded, adding that the country is not out of the woods. He said  Customs calculate duties on imported raw materials using the official rate which moved from N197 per dollar to N281 per dollar on Monday after the new foreign exchange policy started.

    Obasanjo, who manufactures corrugated cartons and flexible packaging for different items such as confectionary, bread, noodles, spaghetti among others said pricing for gas, is also done using the official rate, and will now be adjusted to the new rate.

    He said the Customs will have no choice but to adjust its template of duties, which means more revenues for the government. “I see  Customs revenues jumping in the months ahead but manufacturers are going to pass the higher duties to consumers. It is painful but we have no choice,” he said.

    He said though the policy was meant to attract Foreign Direct Investment (FDI), it may not come. “FDI may not come. Even if there is FDI inflow, that is not what will save the Nigerian economy; diversification of the economy is the answer and people should start patronising made-in-Nigeria goods,” he said.

    He believes to get the local industry into the league of players where it could begin to act with full capacity in the production of goods and services, the government should step in by providing the needed infrastructure.

    “It is not a one-direction approach. All hands must be on deck to get Nigeria to its desired destination of being an industrilised nation. By fixing power alone, the cost of production of goods and services will drop significantly, helping operators to compete in the global market. The same thing applies to low interest rate that is needed to make manufacturers also compete favourably by reducing the cost of their operations.

    “If I am producing everything in Nigeria, it means Nigerians will be employed starting from drivers, cooks, secretaries, cleaners, gardeners and even security personnel. That is a major contrast if the goods are imported. By producing goods locally, so much value will be added to the domestic economy,” he said.

    He added that if  farmers are producing locally, it will improve their capacity over time and also create job. This will help Nigeria to leapfrog from consumption-based economy to production-based economy.

    On other benefits of local production, he said being the net exporter of goods and services places the country in a vantage position to earn huge forex. Hence, instead of scrambling to buy dollars, manufacturers can earn dollars and boost the domestic currency.

    But achieving this will require the co-operation and support of all stakeholders, he argued. “It has to be a coordinated effort and the policy needs to be encouraged. The support should come from all stakeholders. Although some people are going to lose out in the short term because they are importing these items,  if we boost the local production capacity, in the long-run, we will all be better off,” he promised.

    To show that it is possible, he said there are multinational companies that have continued to produce locally over the years, employing millions of Nigerians.

    Managing Director, Financial Derivatives Company Limited, Bismark Rewane, explained the exchange rate has been a hot topic of debate in recent months. This is not the first time Nigeria has suffered from an overly controlled currency.