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The leadership of the Lagos Chamber of Commerce and Industry (LCCI) has called on the members of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) not to prolonged effect of illiquidity in the foreign exchange market on the real sector by leaving the rates as they were at the end of last year’s meeting.
In an interview, the rates as they were since last year has not done the economy any good since last year and the scenario is only extending exit possibility from recession.
According to him, revamping the rates to reflect the reality on ground in the economy will inflate the system’s liquidity and reduce forex stress to rebound manufacturing spree once again.
He asked the MPC members to develop a framework to ensure liquidity in the market by restoring investors’ confidence in the economy, saying this can only be possible if restrictions on the 41 items see ease today.
The Director-General of the chamber, Muda Yusuf argued that “the exclusion of the 41 items from the official foreign exchange market should be reviewed to exempt the critical manufacturing inputs, as listed by the Manufacturers Association, that are currently on the list”.
“Again, the import exclusion policy should be managed within the context of the trade policy framework.
“We believe that a framework to ensure the liquidity of the foreign exchange market should be urgently put in place to restore investors’ confidence, enhance forex inflows, boost foreign direct investments and foreign portfolio investments, and reduce the level of uncertainty in the economy.
Yusuf further advised that the tight monetary policy regime should be relaxed to spur domestic investment and consumer spending, saying “import tariffs should be reduced across board to moderate the current high cost of goods and services, boost investment spending and enhance disposal income of citizens.”
On the flip side of the forex debacle, he noted that currency depreciation is inherently a very potent protective mechanism for local production as it enhances the competitiveness of products with high local content if other factors are right and in place.
Continuing, LCCI chief said “Sharp currency depreciation and high import tariffs put together pose a major burden of cost and inflation on investors and citizens”.
Also speaking on the vein, leading in the crusade for better rates that will deepen the weak ease of doing business is the Manufacturers Association of Nigeria (MAN) who had been pleading with the federal government to review foreign exchange policy of the Central Bank of Nigeria (CBN) which placed ban on 41 items from accessing the forex market. Already, over 44 manufacturing firms have gone under due to the challenge of accessing forex.
In his submission, leader of the association, Dr. Jacob Frank said some of the items that were restricted from accessing the forex market could not be sourced locally; hence the restriction is faulty since arrival.
According to him, “The association has done an analysis on the banned items and we broke the 41 items into 110 and of the 110, 75 are raw materials for our members. It is these 75 items we ask the federal government to remove from the list so that our members can source foreign exchange to buy their raw materials.”
“I can say we have lost between 44 of our members. They have gone out of business because of their inability to source foreign exchange to bring in the materials.
In his advice, “The way forward in respect to inaccessibility of foreign exchange for manufacturers is for government to review the 41 items that will involve the stakeholders for us at MAN”.
”Such raw materials that cannot be locally available should be removed from the items and we want them removed so that those companies will not die.
Jacob added further that if the MPC meeting does not threat this issue, most of the struggling companies may start to announce their closures or relocation to neighbouring countries where they can get better ease of doing business.
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