By Adefolarin A. Olamilekan
It no more news that the Nigerian economy cannot be isolated from the perennially prone exogenous and vicissitudes of global economic developments. In this wise both her fiscal and monetary policies are subject to international economy dynamic. Although, it is expected that national economic interests, we mean what has been regarded as ‘economic nationalism’ tenets should guard our decision.
Poignantly, our number one sources of revenue is crude oil, off which we are at the mercy of it international market price flunctuation and if it drop below $50/barrel or any shock due to the uncertainty around it. The burden will be excess on our foreign reserve as well as on government cutting down its spending on projects that would have reduce infrastructural gaps and poverty.
As the year 2022 unfold either along the many Economic projections served out by IMF, World Bank and others. We however, live in a world that the poor have less regards for such projections, but they remain economic managers policy references.
The above brings us to the recent statement credited to the Central Bank of Nigeria (CBN) Governor Godwin Emefiele as reported in the media. That the apex bank plan to stop Deposit Money Bank (DBMs) from coming to CBN with all it forex request. Through up a lots of issues that demands critical analysis, especially as one is confronted with the dilemma of which tents to allian with.
Nevertheless, according to Emefiele, the “CBN will stop banks from coming to the CBN for foreign exchange and will direct them to the export proceeds market where they can match their import needs with export proceeds,’. The apex bank chief added “The era is coming to an end when, because your customers need 100million dollars in foreign exchange or 200 million dollars, you now want to pack all the dollars and pass it to CBN to give you dollars. He went further to illustrates his concern by saying that DMBs “ must go and join the race to build your foreign exchange from your export customers to fund your import customers,”
Interestingly, for us the CBN is coming to the realization that, the uncertainty around the four major sources of FX inflow into Nigeria; proceeds that includes from crude oil exports, proceeds from non-oil exports, Diaspora remittances, and foreign direct/portfolio investments is not hidden. We may also add here that these four source of forex has been had hitt resulting in slump inflow courtesy of the pandemic.
Nonetheless, the CBN on it parts as been innovative and genuinely pursuing policies arising from a new thinking. For instance the ‘Naira-4-Dollar’ policy, the apex target to inspired significantly improve the Diaspora inflow . This the apex disclosed has jackup from an average of US$6 million per week in December 2020 to an average of over US$100 million per week by January 2022.
We cannot forget in a hurry the other various interventions funds to businesses and enterprenurs across the country who are interested in expanding there existing plants or building brand new ones for the sole purpose of adding significant value to Nigeria’s non-oil commodities before exporting the same. Meawhile, the recent e-invoice and e-valuator policy out to add value to import and export.From the side of prudency,though many kick against it.
Sadly, the question, that begg for answers is what has been the role of DMBs in forex generation in the Nigeria economy? Because from the statement of the CBN governor we can fathom a reality whereby DMBs, abandone the export facility window. Another questions therefore, is, what are the DMBs doing with export customer? Do we have enough export customers that the DMBs can generate forex from?Why did the DMBs abandone the export forex window?
The answers to above raised questions stir us in the face. For us the answer, evidently is in the specter of CBN feeding the DMBs with surplus forex from crude oil exports,non-oil exports proceeds, Diaspora remittances, and foreign direct/portfolio investments.
This creates poor drive on the part of DMBs. In other word,while the CBN struggle all out by deflating our foreign reserved to meet DMBs attending Dollar demands,an oppressive distortions is brought to bear on the Naira exchange rate.
Succinctly, the reality, however, is that DMBs as a huge role to play collaborating with CBN in generating forex for people who needs its.But what has come to fore is that roundtripping and double dealing in forex is a huge profits for DMBs.
This in fact made them turn against the social welfare role of expected of them. Regrettably, the adverse consequences is evident in the rate of inflation, the cost of funds and ultimately on the exchange value of the Naira
In retrospects, successive CBN Governors, over looks the aspects whereby the DMBs are to build foreign exchange from there export proceeds of customers as well as to fund import customers. As demand by Godwin Emefiele the current CBN governor.
Although the recent economic reality required not just liberal monetary policy that would expand the capacity of our banks to create money..
Fundamentally, we need a monetary policy that would salvage Nigerian economy from oppressive and retarded DMBs activities. Arguably, the monetary environment over the years is not free from it own systemic and systematic contradiction especially in forex management. Similarly, the apex bank has labored to ensure the real sector of the economy concentrate in production as stop gap or through backward integration to reduce our importation. In fact, the apex going forwards reduce the monetary policy rate to 11.5% percent as enhance effective credit capacity of the DMBs to customers.
Our stand as a way forward, first, as the apex bank put out many policy, it is our prayer that the authorty must see to its sustanance. Especially as policy somersault is a recurrent decimal in our clime. The monetary authorities must be stedfast to avoid distortions in its monetary instruments.
Secondly, to ensure monetary equilibrium equally require eliminating or minimally reducing the burden of round tripping and double dealing in forex. Which in most casees compound lost of confidence in the apex bank official forex platform. Lasly,the apex bank with all sense of urgency must ensure the DMBs proactively take advatange and opprtunity available in the export /import facility window to fund the forex needs of import customers.
Inconclusion,one of Nigerian finest economist and a monetary expert per excellecy Late Sir Henry Boyo,would always adminition the CBN “in creating monetary frameworks and policies that strengthen the Naira, an act that will be in the interest of all Nigerians.Thus,it is to us also re-emphasizing it today again.
CBN,DMBs save the economy and redeem the Naira. Relentlessly!
