NESG Partners BHC On Forex Policy Dialogue

By Modupe Gbadeyanka

A public forum discussing foreign exchange policy of the Central Bank of Nigeria (CBN) was recently held and participants highlighted some of the issues that have caused the weakening of the Naira against the Dollar in recent times, Business Post has learnt.

The event was held in partnership with the Nigeria Economic Summit Group (NESG), the British High Commission and the United Kingdom’s Department for International Development.

At the programme, the effects of the forex policy on businesses in Nigeria were the main focus and it was agreed that a weaker Naira could create new opportunities for Nigeria to expand and diversify the economy by focusing on non-oil exports.

The event came about six months after the CBN had announced its decision to dump the naira-dollar exchange rate peg ($1/N199).

But despite the CBN’s move towards liberalising the foreign exchange market, participants at the forum said some restrictions and interventions imposed by the regulator had limited the ability of the forex market to “clear and adjust.”

It was said at the forum that, “Uncertainty in how the market operates has hindered investment, which might otherwise have eased some of the pressure on the Naira.

“Businesses have had to adjust operating models to a new, at times uncertain, cost basis – with disruptions to operations and the need to pass price increases onto consumers. Therefore, more still needs to be done to address the lingering challenges.”

One of the panellists, Nneka Okekearu of Enterprise Development Centre, was quoted as saying, “Restrictions fuel and sustain the parallel market and the major challenge actually for the government is that of supply- which currently is outside their control.”

Also, the Chief Executive Officer, Economics Associates, Dr Ayo Teriba, said a stress test carried out on the distributional effect of devaluation showed that in all cases, currency devaluation did make poor poorer.

The Chief Executive Officer, Financial Derivatives Company Limited, Mr Bismarck Rewane, described the financial market as the “closest proxy to a perfect market.”

He therefore said that any attempt to make the financial market imperfect would result in “all sorts of distortions and exploitation.”

Additional information from Punch