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CBN And The Furore Over Forex

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By Bala Ibrahim.

As President Muhammadu Buhari arrived in the USA, where he is expected to address the 76th General Assembly on Friday, one issue begging for attention at home is the hue and cry over the exchange rate of the naira against other foreign currencies, particularly the American dollar.

Since penultimate week, when the Central Bank of Nigeria, CBN, banned the sales of foreign exchange to Bureaux De Change, BDC, the financial market situation has been visited by anger and anguish, as the move is apparently pushing the naira into an unprecedented free fall.

The CBN announced the ban, after it accused the BDC operators of fraud and round-tripping, the result of which is making the currency to fluctuate in value.

The naira fall has fueled price instability in the country, because most businesses rely on the black market for dollar sales, despite the fact that the CBN said commercial banks have been directed to meet all legitimate requests.

While the CBN is accusing the private financial practitioners of sabotage, by talking tough and pointing accusing fingers at one Oniwinde Adedotun, founder of AbokiFX, a web platform that reports movements in the foreign exchange market, as being responsible for the sliding of naira against dollar at the parallel market, AbokiFX is furiously denying it.

The CBN is insisting on recognizing only one exchange market, the Investors and Exporters window, as stated by the Governor, Godwin Emeriele. “The only exchange rate market is the Investors and Exporters window, which is the market that we expect everybody that wants to buy or sell dollars should use,” said Emefiele.

But forex observers and those familiar with the financial market are putting the blame on the CBN Governor, whom they accused of mismanaging the system and misleading the government, through fraud and the introduction of the multiple exchange rate.

In April last year, Nigeria had more than five exchange rates. The CBN’s official rate, which the government uses, the NAFEX rate, which is used in the Investors and Exporters (I&E) window, two Secondary Market Intervention Sales (SMIS) rates, the Bureaux De Change (BDC) rate, and the black market rate.

This was changed to the dual exchange rate, which was created and made to work in a way that keeps the naira at a fixed official exchange rate and a separate floating rate applied to specified goods, sectors or trading conditions.

The financial experts say the multiple exchange rates are discriminatory in nature. If there is an over-all depreciation of currency, the adverse effect is widely spread over many commodities, and that is precisely the position of Nigeria today.

Another disadvantage of the multiple exchange rates is that it allows cheap imports from abroad, which affects domestic production, as is evident in recent days, where inflation is hitting every sector of the Nigerian economy. Prices of goods have gone through the roof everywhere in Nigeria today.

The proliferation of black marketing in Nigeria is also attributed to the multiple exchange rates, which is encouraging arbitrage, as the foreign exchange is bought at a cheaper rate from the CBN, mostly given to cronies and fronts of those in charge, and sold higher at the black market.

Apart from the wastefulness of the multiple exchange rates, it also leads to large stock¬piling of exportable goods in anticipation of more favorable reclassifications of some of them, resulting in the accumulation of inventory stocks.

As PMB is scheduled to have high level meetings and bilateral discussions with different world leaders and representative samples at the General Assembly, to discuss issues of common interests, one challenge he would face is the question of how far Nigeria has gone in the fight against corruption, the paramount problem he promised to fix.

Nigeria must change the narratives in order for the world to believe in it’s global vision, and there is no better time to demonstrate the seriousness of the President to the world than now, by arresting the scourge at the CBN, the apex bank of the country.

Reports have it that before his departure to America, the President had directed the Economic and Financial Crimes Commission, EFCC, to investigate the CBN on its foreign exchange policies. Good.

For long, the CBN Governor, Godwin Emefiele has been accused of running policies that are undermining the economy and running at cross purpose with the economic ambition of the Buhari administration.

From 412 to the dollar few weeks back, the naira is now heading for 600, courtesy of Emefiele’s economics, which looks clearly incapable of restoring the strength of the naira.

The question on the lips of many is the reluctance of the President to act decisively on the Governor, despite the numerous lapses on the foreign exchange policies of the Central Bank.

Last year, the president directed the CBN not to provide forex for the importation of food items or fertilizer, but there is nothing to prove absolute compliance.

For a President that promised Good governance and anti corruption, he must act properly on the alleged wrongdoings at the CBN, by setting example, and letting the world see that he has acted.

That way, investors confidence would be restored. The value of the naira would be strengthened. And the trust, firm belief and faith everyone has on the credibility of Mr. President, would seize to be a part of the forex furore.

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