Mixed reactions greet Nigeria’s new foreign exchange policy
Reactions have continued to trail the Central Bank of Nigeria’s (CBN’s), special foreign exchange window for Small and Medium Enterprises (SMEs) and special foreign exchange window for investors and exporters.
An Abuja-based businessman Mr Richmond Adah said the new window for importers will help in generating more foreign exchange for the country through facilitation of trade-related payment obligations at the instance of the customer.
He, however, advised CBN to take a second look at its 41 items not eligible for foreign exchange as such will further boost manufacturing and export.
but CBN spokesperson, Isaac Okorafor, said the new supply window would enable SMEs import eligible finished and semi-finished items not exceeding $20,000 for an enterprise per quarter The Central Bank of Nigeria, CBN, on Monday opened a special foreign exchange window for Small and Medium Enterprises, SMEs.
Similarly, CBN, on Friday opened a special foreign exchange window for investors and exporters.
Tagged: ‘Investors’ & Exporters’ FX Window,’ CBN’s Director in charge of Financial Markets, Alvan Ikoku, said the new window would boost liquidity in the forex market and ensure timely execution and settlement for eligible transactions.
Dr Frank Jacobs, MAN President, said, “It is a step in the right direction that will reasonably address the FX challenges of the SMEs and spur productivity, employment and wealth for the nation. It is, therefore, imperative that the CBN effectively monitor and evaluate the implementation of this special FX allocation with a view to developing a more realistic framework that will accommodate commensurate increase in amount of FX dollars that closely reflects the realities of the needs of SMEs.”
According to him, MAN in its one month (March 2017) concise situation report on the impact of the new CBN policy on the manufacturing sector, had earlier identified the need for government to provide a special window for SMEs to access FX.
This was based on some of our observations that the commencement of the flexible exchange rate regime and the new CBN FX policy were aggressively crowding-out the SMEs from the FX market as they are unable to source FX like the large and multinational companies. In fact he further observed, companies within the SMEs category lacked the financial wherewithal to participate in the FX forward segment and even those with unconfirmed LCs (Letter of Credit) could not access FX.
He, however, said that MAN has called for a significant upward review of the forex allocation by CBN to the SMEs, adding, “You can now conspicuously see that though the $20,000 per quarter FX allocation will fairly support production on their shop floor, the amount is too small to catalyze substantial additional activities that will spur more employment.
“In addition, the $20,000 per quarter FX allocation to one SME company is worth only about N6million going by the prevailing official exchange rate. This is a meagre 1.2 per cent of the asset-capital that the company will deploy for its operation in that quarter. In consideration of all of the above, especially the latter, one can safely deduce that the $20,000 quarterly special FX allocation to SMEs may not be sufficient to effectively meet their raw-materials and machinery needs.”
Investors in small businesses and exporters have always decried the closure of several investments due to lack of access to foreign exchange to procure necessary facilities to support their operations.
On the bureau de change segment, Mr Okorafor said about $10,000 each was sold to BDCs to meet the needs of low-end users in the country.
The apex bank said an average of $99.5 million was being picked up by dealers out of the $100 million offered by the bank during the last wholesale auction on April 6, 2017.
Meanwhile, operators in the BDC segment funded their accounts with the CBN in anticipation of picking up the dollar equivalent ($10,000), weekly.