Lagos Chamber of Commerce and Industry, LCCI has expressed concerns over the unintended consequences of the recent Central Bank of Nigeria’s, CBN policy on foreign exchange management, especially the exclusion of 41 products from access to the foreign exchange market, saying its multidimensional and far reaching implications would potentially result in major disruptions, dislocations and panic among many investors in the economy.
In a statement signed by LCCI president, Mr. Muda Yusuf, he said many of the products on the list of the 41 products were intermediate goods which are critical inputs for many manufacturing firms as well as other critical sectors of the economy.
He said this development will put several investments at risk with implications for job losses, quality of loan assets in the banking system and the welfare of citizens.
He listed some of the goods that will be affected as iron rods, Cold Rolled sheets, wire rods, reinforcing Bars, Polypropylene granules, glass and glass ware. The construction, real estate, fabrications, housing, etc will be adversely affected, he added. He said: “A painstaking gap analysis to determine the domestic capacity for production vis- a- vis the demand should have preceded the policy decision by the CBN.
“The list is prone to multiple definitions and discretionary interpretations by agencies and institutions responsible for implementation. This discretionary interpretation would create room for corruption.”
He stressed that the alternative forex markets or the parallel market and the BDCs are not deep enough to meet the demand of the essential intermediate products on the exclusion list.
Bello said the exclusion of the items from the forex market is as good as import prohibition.
He further said the policy measure will lead to the widening of exchange differentials between the interbank markets and the parallel markets.
The immediate consequence he argued would be rampant round tripping of foreign exchange which the CBN has limited capacity to curb.
The LCCI boss said CBN approach to forex allocation appears administrative in nature, a system prone to abuse and considerable corruption.
“It could only be likened to the import licensing era of the early eighties,” he said.
He further added that the policy has far reaching implications for investors in fabrication, construction, real estate sectors, noting that facilities granted to investors affected by the shock of this policy are also at the risk of going bad.
On the way forward, Bello suggested putting the policy on hold pending a proper study of the demand and supply gaps in the various sectors affected by this policy.
He urged CBN to focus more on the market fundamentals and as much as possible allow market mechanism to drive the allocation of foreign exchange. The closer the rate is to equilibrium the better for the economy and less disruptive for investors, he said. Furthermore, he urged president Buhari to urgently set up his Economic Team and cabinet to give clear direction to the economy.
“Some of the actions of the CBN bother on fiscal policy measures than monetary policy. There is need for the administration to come up with a clear policy on trade, import and exports, interest rate, exchange rate etc. The ministries of National Planning, Finance and Trade and Investment should have critical inputs into policies of this nature. This is necessary to stem the current uncertainty and volatilities in the economic policy space. There should be an integrated approach having regard to the inter-sectoral linkages and inter dependence of sectors in the economy.”
He also advised CBN to engage key stakeholders to appreciate the dimensions of the shocks and disruptions of the current policy pronouncement.
He advised the importance of situating policy decisions within a larger economic context than the narrow prism of monetary variables.

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