CBN and the burden of currency rackets

IT seems Nigeria is getting back to its old foreign exchange musical chair once again after the nightmarish experiences of 2015/16 crises. In the past two weeks, the foreign exchange market came under pressure as a result of many factors. 

The main one was that many investors that flooded the economy with foreign exchange in portfolio investments are pulling out, which has led to serious demand pressures. Consequently, the Naira had depreciated across all market segments. 

 But of concern to us is the depletion in the nation’s foreign reserves. We were hopeful and excited as it closed in on USD50 billion mark in April 2018, a four-year high. It is now about USD47 billion. We are also concerned that the motley of foreign investors that had trooped into the system in the wake of the Investors & Exporters forex window are now pulling out due to reasons associated with adverse perception of the country’s risk in the run-up to the general elections. 

Consequently, the Central Bank of Nigeria, CBN, is back to pressure points, pushing panic buttons with sporadic circulars, backed with threats. The Governor of the CBN, Mr. Godwin Emefiele, has warned banks against selling dollars to eligible travellers above the stipulated price of N360. According to Emefiele, the CBN examiners will continue to do on-the-spot assessments at banks to find out and be sure that people who are travelling get attended to Over-the-Counter. 

We do not advise that Emefiele should be forced to micro-manage the forex market. He has done a herculean job stabilising the market in the 2015/16 crises foisted on him by the badly-structured economy, coupled with negative macro-economic policies of the government of the day.

 The unwholesome practices of Nigeria’s political and economic elite that bordered on currency malpractice did not help matters. We also note the brewing war between the CBN and the Bureau de Change, BDC, operators over deal rates. We expect the CBN to create and ensure a level-playing field between the banks and the BDCs. But we are aware that the CBN is also fighting some powerful underground forces behind the currency rackets. 

We know that the forces are either directly in the corridors of power or are connected to them. We also know that the banks or bank executives run their own parallel market currency rings. But the apex bank should find a way of exposing these undercurrents and the attendant leakages which may have proved too difficult for a direct taming. 

The apex bank cannot afford to report negative external sector indices now the country can still count on the strength of the oil revenue supported by a robust oil production figure and international crude oil price.