BY BUKOLA IDOWU, Lagos
With the two months period of the Naira4Dollar initiative of the Central Bank of Nigeria (CBN) almost over, analysts and stakeholders in the Nigerian economy say there has not been much improvement in the foreign exchange liquidity in the country.
The CBN had in March this year introduced the pilot scheme of the Naira4Dollar initiative which gives recipients of remittances into the country an incentive of N5 for every dollar as a way to encourage remittance inflows through official channels and increase foreign exchange liquidity in the country.
From March 8, 2021, when the policy kicked off until May 8, 2021, all recipients of diaspora remittances through CBN-licensed international money transfer operators were paid N5 on every dollar that they receive as remittance inflow.
CBN Governor Godwin Emefiele, who expressed confidence that the campaign would yield positive results, had said the measure would encourage banks and financial institutions to develop products and investments vehicles geared towards attracting investments from Nigerians in the diaspora.
“We have no doubt that these changes can help to finance a future stream of investment opportunities for Nigerians living abroad,” he said.
As the policy ends this Saturday, May 8, 2021, analysts, whilst applauding the initiative, however, say it has not had real impact on the liquidity level of foreign exchange, which they say continue to be scarce. This is also considering the fact that remittances are likely to drop as economies where the remittances come from are also just recovering from the COVID-19 pandemic.
Director-general of the Lagos Chamber of Commerce and Industry, Muda Yusuf, says the forex liquidity position has not improved. “Exchange rate is still high at N480, N485 and some still buy at N500 and this is affecting businesses, capacity utilisation and output, causing scarcity and rising prices. This is one of the reasons inflation is rising in the country.
“There is still scarcity of forex. The situation has not changed; if anything, it has become worsen. The CBN remittance Naira4Dollar is a good one to encourage inflows, but if they expand the scope to cover all other sources of inflows, it will allow more inflows into the country. What is needed is to allow people to sell at any rate rather than tell them which rate they must sell. This will further improve liquidity.
“Exporters are complaining that the rate they get is not market rate and many of them are reluctant to bring in proceeds. This will change if they do not impose rates. There is the need to relax the rigidity of fixed rate in the forex market. If they relax, liquidity will be improved.
“The other thing is that we are spending way too much than we are earning on imports, especially oil importation. With oil at above $60 to $70 per barrel, the system should have begun to see some improvement but a lot of what we earn go back to importing oil products. So the economy is not as it should be. We need to fix the oil sector, get the deregulation of the oil sector done so that the burden of the NNPC is removed.
“If these are done, it will ease the forex liquidity and further strengthen the economy. We also need to encourage foreign direct investors (FDIs), foreign portfolio investors (FPIs) and exporters by liberalising the forex market and removing all bottlenecks including pricing.”
On his part, the managing director and chief executive of Cowry Assets Management Ltd, Johnson Chukwu, says although there are no official figures as to how much has been remitted during the period, “before you can receive remittances, you need to look at what is going on over there.
“Most of the western countries are going through difficulties, so Nigerians in those countries may not have surplus to send home as those countries are coming out of recession and COVID-induced lockdown.”
Chukwu was, however, particular on encouraging exports as a way of improving foreign exchange inflows in the country. To him, to encourage exports, the country must have exportable products.
“We don’t have many exportable products because our productivity is weak, our value addition is weak. Our cost of production is high because the cost of doing business is high in the country.
“For that reason, when we produce something in terms of intermediate or final goods, they cannot compete with products produced elsewhere. That is the major constraint to export. We need to create an environment that will make it easy for us to produce a lot of goods in the country that are exportable.”
This is also the view of development economist, Tayo Bello, who says the country is not exporting enough products that could fetch it the needed foreign exchange.
“How many things are we exporting in this country?” he queried.
Speaking further he said, “We used to have sesame seeds, rubber, but they are no longer available. Tell me what we are exporting today? Most of the forex we have in the parallel market are proceeds of illegal transactions from drug dealings and so on. NNPC gets forex through crude sale.
“There is so much pressure on naira. It will continue to remain so because Nigeria’s economy is an import-dependent one; we import everything. Nigeria still imports toothpick; even our petroleum products are being imported. We don’t have exportable products because all the factories have closed down. We used to have cocoa, palm oil, cotton, hides and skin, and yam tubers, amongst others, but today farmers cannot go to farm, so we will continue to have instability with all these.”
Bello further said without CBN’s intervention, the exchange rate would have gone to N1,000 to a dollar.
He, however, posited that the Naira4Dollar policy is one that should have been implemented before now, for, according to him, banks and IMTOs (International Money Transfer Operators) have been cheating customers by giving them local currencies instead of foreign currencies during remittances.