The 60 per cent foreign exchange (forex) allocation by the Central Bank of Nigeria’s (CBN) to the manufacturing sector, leaving only 15 per cent allocation to other sectors of the economy, is unsustainable, the Director-General, Lagos Chamber of Commerce & Industry (LCCI), Mr. Muda Yusuf, has said.
He told The Nation that currently, petroleum products importation takes priority and could take 25 per cent of forex allocation, which implies that the rest of the sectors would settle for the balance of 15 per cent.“This clearly is not a sustainable framework,” he said.
He said the challenges facing the economy were multifarious, noting that the policy was capable of posing a risk to the stability and transparency of the forex market.
He said the policy was also unclear as it failed to indicate any Harmonised System (HS) code to properly define what would qualify as raw materials and machinery, adding that it might give rise to discretionary interpretation by the banks.
The LCCI boss also frowned at the crowding out of other sectors in the forex market, saying sectors outside manufacturing account for over 85 per cent of the country’s Gross Domestic Product (GDP) and jobs, with varying import contents in their operations.
He said there was need for the CBN to enlighten Nigerians on why 60 per cent of all forex allocations should go to manufacturing, raw materials and machinery, while neglecting the other sectors.
He stressed the need for the government to recognise the importance of the interdependence of sectors and the integrated nature of the economy, noting that all sectors complement one another for the economy to function properly.
While stressing that his position was not to diminish the critical importance of the manufacturing sector in the economy, he said the goal was to call the CBN’s attention to the fact that other sectors play important roles as well.
He listed other sectors that need forex to include Information and Communication Technology (ICT), real estate, transportation, aviation, maritime, tourism, hospitality, entertainment, agriculture, distributive trade, health and education services.
Others are broadcasting, print media, solid minerals, engineering and construction, among others, which he insisted were also very important sectors that required forex. Without these other sectors, he said, the sustainability of the forex sectoral allocation could only create more confusion in the market.
Yusuf, therefore, advised that fiscal policy measures are better suited to address sectoral imbalances than monetary policy. Such policies, the LCCI chief said, include tools, such as import tariffs, taxation and other incentives.
He, therefore, canvassed the need to upscale infrastructure investments very urgently. “These are more effective ways to fix the structural problems of the economy than monetary policy,” he advised.
He also pointed out that what was key was for the monetary authorities to ensure that financial markets were efficient and transparent, and to ensure that there was discipline among players.
Noting that this is the time to seek quick wins, Yusuf said one of the quick wins is to review current trade policy measures in order to reduce the pressure of cost on investors and citizens. He said the exchange rate depreciation has an inherent structural correction effects on the economy.
“It (exchange rate depreciation) naturally rewards inward looking initiatives and resource based enterprises. It is too much of a shock on the economy to combine high import duty regimes with a weak and rapidly depreciating currency,” he said.
According to him, conversion of import values at current exchange rates for purposes of computation of import duty and other port charges have escalated costs beyond measure and had paralysed many businesses.
Yusuf also observed the burden of cost and inflation, which he said has become unbearable with consequent aggravation of poverty. “The proposition here is to moderate the inflationary pressures and ease poverty conditions by reviewing import duty regimes and the various trade facilitation issues at the nation’s ports. This could be done without undermining current economic diversification drive,” he added.
He further called for a more effective oversight over the terminal operators and shipping companies to curb unfair charges on imports and exports made possible by the several monopoly structures in the maritime sector.
According to the LCCI boss, ensuring a balance between the interests of investors, producers, consumers and the welfare of citizens is a strategic imperative at this time.
