That the nation’s foreign exchange market is pervaded with uncertainty coupled with the attendant anxiety is no longer news, except that customers and end users are scrambling for the elusive currencies by all means.
Consequently, the recent devaluation amidst lower prices, first from N306 to N360/$ and later by another adjustment of July 7, 2020, which moved the rate at the Special Secondary Market Intervention Sales (SMIS) to N381/$ may have contributed to the sharp practices, typified by round-tripping going on in the market.
The convergence of the exchange rate towards the I & E rate of N386/$ has started, as the CBN raised its official rate to N380/$ from N360/$. This means that only bids above N380/$ will be considered for forex allocation. The convergence of all forex rates towards the I & E rate is aimed at stopping multiple exchange rate practices and endearing Nigeria towards international investors and multilateral agencies. This has been a herculean task for managers of the economy.
In deed, a depreciation in the currency means that imports will be more expensive and exports more competitive. However, coupled with the existing strains to disposable income, it will be a double whammy for the already cash-strapped consumers even as manufacturers see it as having the potential to increase their import bill and cost of production.
Similarly, the current attempts to unify exchange rate at this auspicious time without first sanitizing the Bureau De Change (BDC) segment of the market, is seen by some analysts as a misplaced priority by CBN.
In fact, the alleged unwholesome measure of clamping down on the operators by CBN and currently tying their return to the market to resumption of flights by airlines, again, is considered as an ‘unwise’ decision.
In what some analysts see as another obnoxious policy was the recent directive by CBN to the effect that all banks with regional licences should expand their operations to an additional adjoining geo-political zone, a development that is considered as antithetical to the protocols of the Centre for Disease Control, (CDC).
This is because the implication of the policy is that the total number of zones of their operations will increase to three.
In the reckoning of CBN, its action will promote financial inclusion and the spread of regional banking services to the rural areas.
But, Bismarck Rewane, chief executive of Financial Dirivatives Company, in one of the recent Monthly Bulletins for June said, “Ironically, it is coming at a time of increased virtual banking and e-commerce. The value of e-payment transactions system-wide has increased by 47% from N8.1trn in April to N11.9trn in May, compared to a mere 9% increase during the corresponding period of 2019,“
According to him, this is “In spite of the insistence of social distancing by the NCDC, the Central Bank of Nigeria is directing”.
But, some of the analysts say that the black market exchange rate currently at over N472/$ will not improve with the lifting of ban on BDC without sanitizing the market
“Let me tell you… the current policy of total clampdown by the powers that be to impress their principals will not last. Tell your economic managers that they need to justify their appointments by meaningful contributions to the economy rather than trying to protect and defend their appointments and positions.“
Speaking further, he said, “Who is actually in charge of the economy right now and where are we headed. In a situation where banks rely on the black market operators to supply FX, what do you call that kind of economic system?.
According to an analyst, the scarcity of forex in banks could be attributed to poor remittances and inflows from other major sources of foreign exchange such as import and export activities, but added that ‘there is need for monitoring and close supervision of the market. Again, there is need for synergy between fiscal and monetary policies.’
