Barely one month after the Central Bank of Nigeria banned the sale of foreign exchange to Bureaux De Change (BDC) dealers, the Naira has been exchanging for N530 per dollar, N722 per pound and N622 per Euro in the parallel market.
The apex bank has restricted sale of forex to DMBs which would in turn sell only to customers who present legitimate documents and reasons for the intended purchase. The CBN Governor, Godwin Emefiele, gave graft and gradual dollarisation of the economy as the reasons for the ban. While in 2016, when a similar ban was enforced, greed of BDCs was his reason. When the ban first hit the public at the end of July 2021, Nigerians were panicky over what this portended for the prices of household commodities in an economy heavily dependent on importation. During this period, some economists applauded the decision of the bank while others said that it was not the right path especially when the Monetary Policy Committee was hammering on policies to reduce inflationary rates. Inflation has dropped by a few decimal points since then but the Naira has kept on depreciating in the parallel market which most believe to be the true reflection of market rates following the CBN’s decided intervention in the Investors and Exporters (I&E) NAFEX window.
The World Bank has said that the high inflationary rates in the country stem partly from tight exchange rate controls and another from certain monetary policies. The World Bank, after the CBN adopted the NAFEX USD rate as its standard rate, asked Nigeria to provide a clearer and more predictable foreign exchange management system before it would release its $1.5 billion loan. Dr. Muda Yusuf, economist and former Director-General of the Lagos Chambers of Commerce and Industry told this newspaper that dollarisation of the economy and the said greed, as well as graft encouraged by the BDCs, were only symptoms of the underlying problem posed by CBN’s tight regime on the exchange rate and the refusal to let the market determine the rates. He said that restricting the retail of forex to DMBs was only postponing the forex crises and could not serve as an effective solution to the problem Nigeria faced with forex.
“The forex conundrum is largely a consequence of the CBN policy choice of a fixed exchange rate regime and administrative allocation of forex. It is a policy regime that has created a huge enterprise around foreign exchange – round-tripping, speculation, over-invoicing, capital flight, etc.,” he said.