The Central Bank of Nigeria (CBN) has made a robust defense of its foreign exchange policy, saying the fundamentals of the Nigerian economy remain strong and are helped by measures by it to curtail frivolous foreign outflows in the face of the recent oil price decline.The apex bank points to recent data by the Bureau of Statistics, showing inflation rate of nine percent which is within the CBN’s single-digit band, the exchange rate has stabilised around N197 per US Dollar for the last five months, GDP expanded by four percent in the first quarter of 2015, and 469,070 new jobs were created in the same quarter, data from the Bureau of Statistics and CBN show.“As we transition into a new administration in Nigeria, we must continue to ensure policy stability at all times,” the CBN said in a July 03 statement signed by Ibrahim Mu’azu, Director, Corporate Communications.
Meanwhile, Aliko Dangote, CEO of Dangote Group and Africa’s richest man, has offered the strongest support yet to the foreign exchange policy of the apex bank, describing the ban on 41 items from forex market as “excellent and one of the best decisions taken so far by the CBN Governor, Mr. Godwin Emefiele.”
Dismissing criticisms in some quarters against the apex bank’s decision to restrict forex on the importation of certain items, Dangote, whose cement footprint spreads all over the continent, called the CBN’s intervention appropriate for the Nigerian economy, for as he said, “we cannot be importing poverty and exporting jobs.”
Dangote said the move by the CBN should be seen as a clarion call for all hands to be on deck in the development of the nation’s economy, disclosing that the foreign exchange restrictions on the 41 items also affected the Dangote Group, especially the Dangote Rice.
He however believes that the measure would encourage his firm “to look inward and massively produce locally to create jobs for our growing young population.”
Dangote said without such a ban by the administration of former President Olusegun Obasanjo, Dangote group wouldn’t have got the opportunity to grow his cement business as it is today, such that he is now exporting cement when only ten years, ago Nigeria was importing cement massively.
Like other oil-exporting countries, the Nigerian currency, the naira had experienced some demand pressure in the past six months.
The CBN struggled with meeting demand for dollars, due to the 40 percent fall in crude oil prices to below $65 a barrel in the past year, and because Nigeria gets up to 90 percent of dollar earnings from crude oil sales.
This led to the CBN introducing some administrative measures to defend the naira and protect its scarce foreign-exchange (FX) reserves.
Such measures included the recent ban on some importers from using the interbank FX market to access dollars for 40 categories of goods and trading restrictions to stabilise the naira that weakened 14 percent against the dollar in 2014.
The CBN notes that: “the items were only included after thorough and exhaustive discussions at the highest policymaking body of the bank, with the strategic national interest of Nigeria.”
The CBN in the statement, says that the most recent 22 percent depreciation in the currency, to its current levels is optimal at this time because the Nigerian economy is heavily dependent on imports and the exchange rate pass-through to inflation is high.
“Adjustments to a sharp decline in supply of US dollars cannot all be borne by an indeterminate depreciation, without considering the full impact on the Nigerian economy,” the statement said.The CBN says it believes the current pressure on the naira is an opportunity to change the economy’s structure, resuscitate local manufacturing, and expand job creation for our citizens.
One area it sees good opportunity is in rice, where the Dangote Group and the Stallion Group have announced plans to invest $250 million and N30 billion respectively in Nigerian rice farms and processing plants.
A few decades ago, Nigeria was one of the world’s largest producers of palm oil, but today imports nearly 600,000 metric tonnes, while Indonesia and Malaysia combine to export over 90 percent of global demand.
Under these circumstances, the CBN says it will do all it can to protect the jobs and incomes of local farmers, using some of the same principles Western economies use to justify the protection of their farmers through huge subsidies.
“The CBN does not panic and will not take desperate measures to satisfy few misguided interests in the market. The CBN believes that Nigeria cannot attain its full potentials by importing anything and everything. For far too long, this trend has significantly weakened the operating capacities of our industries, but now is a good opportunity to begin a reversal,” the CBN said.