A presidential adviser has said that the CBN’s naira-dollar policies are not working, The Nation report.
To a member of the Presidential Economic Advisory Council (PEAC), Mr. Bismarck Rewane, the measures adopted by the Central Bank of Nigeria (CBN) to defend the nation’s currency in the foreign exchange (forex) market have yielded little or uncertain results.
Taking a critical look at the weekend at the naira management policies introduced by the apex bank, Rewane rated measure as “low” or uncertain in performance.
He said the bank’s latest initiative of N65 rebate per dollar scheme has no prospect of succeeding.
After his assessment of four initiatives taken by the apex bank, Rewane scored them between low, uncertain and no.
The initiatives included: Naira for dollar, import restrictions, scrapping of dollar sales to Bureau de Change (BDC) and the N65 rebate per dollar scheme.
According to him, the level of success of the Naira for dollar is “low” while the level of success of the imports restriction and scrapping of dollar sales to BDCs is “not sure”.
He said the forex market dynamics raised enough doubts on the success of the latest N65 rebate per dollar, noting that the targeted audience of the policy may not respond favourably to the initiative.
Bismarck outlined that with exchange rate of about N580 per dollar at the parallel market as against N416 per dollar at the official market, the gap of N99 per dollar between the official and parallel market, even after adding the N65 rebate, is too attractive for exporters to ignore.
He said: “Will exporters be willing to give up N99 per dollar out of patriotism? No,” Rewane, who is also Managing Director, Financial Derivatives Company (FDC), stated, in his latest review.
According to him, the N65 per dollar rebate will be mostly ignored while the non-oil exports’ contribution to forex revenue will be flat.
He said the apex bank is faced with the tough choices of increasing forex supply to force price down significantly or increasing naira exchange price to its fair value, thus boosting forex supply. This will push the market towards equilibrium, bridging the unusual supply-demand gap that sustain high price differential.
The PEAC member noted that while the naira has depreciated by 259 per cent over the decade, other oil-producing nations, like Saudi and Kuwait, have had stable, unchanged currency exchange rate during the period.
He pointed out that the oil producers maintain “stable currencies, optimally, efficiently and prudently utilized their oil revenues”.
The CBN had in early 2021 launched its “Naira-4-Dollar” scheme with a promise to drive forex inflow and boost forex reserves.
Under the scheme, the apex bank aimed at incentivising Nigerians in the diaspora to remit their forex through designated agents, or International Money Transfer Organisations (IMTOs), rather than diversion to the parallel market.
According to a CBN’s circular, dated March 5, 2021, all recipients of diaspora remittances through CBN- licensed IMTOs shall henceforth be paid N5 for every dollar received as remittance inflow.
The CBN shall, through commercial banks, pay to remittance recipients the incentive of N5 for every dollar remitted by sender and collected by designated beneficiary.
The incentive is to be paid to the recipients whether they choose to collect the dollar as cash across the counter in a bank, or transfer same into their domiciliary account.
Governor, Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, had underlined the goals of the Naira-4-dollar policy top include increase the transparency of remittance inflows and reduce rent-seeking activities.
“The new policy measure will encourage banks and financial institutions to develop products and investments’ vehicles geared towards attracting investments from Nigerians in the diaspora,” he said.
He said the measure would help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the diaspora, pointing out that the use of reimbursements of remittance fees had been critical in supporting improved inflow of remittances to countries in South Asia and in improving their balance of payments position following the COVID-19 pandemic.
Emefiele said the policy was expected to enlarge the scope and scale of foreign exchange inflows into the country with a view to stabilising the exchange rate and supporting accretion to external reserves.
In January 2016, the apex bank suspended dollar sales to BDCs over similar allegation of racketeering. This was followed by a similar directive to commercial banks to fully take up the responsibility of facilitating forex sales to Nigerians in need of forex for items not included in the list of 41 items banned by the CBN.
Also this year, the bank announced a new scheme to improve dollar supply in the economy.
According to CBN boss, Godwin Emefiele, the scheme “RT200 FX Programme” or “Race to $200 billion in FX Repatriation” aims to attain a goal of $200 billion in forex repatriation from non-oil exports over the next three to five years.
The new scheme is anchored on five pillars of non-oil commodities expansion facility, dedicated non-oil export terminal, non-oil forex rebate, value-adding exports facility and biannual non-oil exports summit.