Nigerian Economist, Ifediora Amobi, has said that the monetary policy reforms that are being implemented by the Central Bank of Nigeria (CBN) are necessary, and if the CBN continues the way it is going, Nigeria will experience a brighter economy by the end of 2024.
He however said that while the CBN is implementing reforms, they should be careful not to discourage investors and exporters from investing in and bringing their business into Nigeria.
The economist made these statements in an interview with ARISE NEWS on Friday, where he said that the reforms have started to come to fruition as he said that this is the first time that the first time the official rate at the I&E window has exceeded the parallel market rate.
“All of these corrections were necessary, and if the Central bank can sustain this momentum, I think we will see a brighter economy hopefully by the end of the year, but it’s not going to be a short-term remedy,” he said.
Explaining what brought about the gap in forex price the official rate and the parallel market rate, Amobi said, “Over the past years, the Central Bank had accumulated foreign exchange payment obligations to various parties, whether it’s the airlines, the embassies, the oil majors, different components of the economy that they were supposed to have settled overtime. And their inability to do that up until now had shifted a lot of the demanders for foreign exchange from the Central Bank or from the official environment into the parallel market, which had actually been the reason why the parallel market had been the driver all these years.”
He went on to say, “With its attempt to fulfil some of those monetary obligations like paying the airlines, I think about sixty-seven billion US dollars, inasmuch as the airlines still claim that they still are owed another seven hundred million dollars, it’s actually the right move, it’s a good move. So, it’s up to the central bank to now ensure that more of this is done, more of the dollars that will be made available to it going forward is used to take care of past financial obligations as well as create an open market for forex demand, and try and bring a lot of those people and companies and groups that were going to the parallel market back to the official market.”
Amobi then noted that the reforms being made by the apex bank are not a one-time thing as he said, “This is not a one-off policy. This is actually the start of something that I actually want to believe would be a continuous process of sanitizing the foreign exchange market. And so, yes they haven’t done enough yet, but if they sustain this momentum and probably come up with more circulars, more guidelines and try to take more control, I believe that they will be able to do more than just going after deposit money banks.
“One of the policies that they have actually introduced as at yesterday or two days ago was the NOP where they charged that banks have a short-term cap of 20% foreign exchange assets and liabilities which they can operate with. Anything more than that will now be, well, not necessarily a violation of that guideline, but will have to be addressed further. What that means in the sense is that banks can no longer buy and sell foreign exchange or hoard foreign exchange or use it for their own purpose to boost their own bottom line like they were doing before.”
Amobi however cautioned the CBN to work in a manner not to discourage investors in the Nigerian space as he said, “CBN is trying to do a lot, which is good, but CBN also has to be careful that they don’t, in the process, discourage our most needed exporters as well as investors outside Nigeria who want to come in and invest and do business here. Most times, the reason why we have incentives as we call them is to be able to give a bit of concession to a lot of these requirements. The documentation is okay because we also have to ensure that what’s going in and what’s coming out of Nigeria follows the legal process and avoid issues like money laundering, et cetera.
“But on the other hand, we should be able to be a little bit more lenient when it comes to achieving our long-term objectives. So, as much as the CBN has come up with these guidelines and it’s going to also help, and it will bring in more foreign exchange, but they have to be a bit cautious so that they don’t outrightly discourage either those who had originally intended to bring their funds into the country.”