There is no doubt that the ongoing intervention policy of the Central Bank of Nigeria (CBN) has eased the pressure in the Foreign Exchange (FX) market. However, the policy needs the cooperation of banks in order to have the desired result. So far, that has not happened. Consequently, the CBN issued a four-week ultimatum to the banks and authorised FX dealers to open forex teller points for retail transactions, Basic Transport Allowance (BTA) as well as Small and Medium Enterprises in all locations.
We are in support of the CBN directive, and any appropriate penalty the regulator may deem fit against erring banks. The CBN directive should be seen for the benefits the policy is meant to serve: to allow for easy access to forex by bank customers and other genuine end-users.
Also, the CBN has directed the banks to install electronic display boards in all their branches across the country to show forex rates and avoid exploitation of customers. The deadline to comply with these measures is October 13, 2017. Failure to comply will attract stiff penalties, which the CBN said would include, but not limited to being barred from all future CBN forex intervention. Again, we see this measure as the right step to ensure transparency and accountability in the FX market that has witnessed many insider abuses in recent months.
We strongly believe that every measure taken by the CBN to check the activities of speculators and protect our currency from further depreciation should be supported by the commercial banks. Meeting the increasing demand for foreign exchange and making sure that they get to the end-users at the recommended fixed rate has been one of the toughest tests for the CBN in recent times. It is, therefore, disheartening that some commercial banks are allegedly frustrating the ongoing effort of the CBN to ensure that foreign exchange gets to genuine end-users.
It is for this reason that the CBN had injected billions of dollars in the last six months. However, the huge injection of forex into the retail end of the market has not really worked effectively, thereby resulting in intense pressure on the market and depreciation in the value of the naira.
Therefore, to forestall such malfeasance, the CBN had in its circular of March 3, 2017 threatened severe punishment against bank CEOs whose banks were found guilty of such under-hand dealings in the forex market.
Though some of the banks have denied frustrating the forex market, any bank caught in such act deserves the severest of sanction that the apex bank may deem necessary. The banks should be reminded of the risks such non-compliance to forex guidelines poses to the economy.
At the same time, we urge the CBN to put its house in order, by ensuring that its officials are not complicit in what the banks are allegedly doing.
Both CBN and the banks have to work together to sanitise the forex market. There is no doubt that forex end-users have had harrowing tales in recent times in their effort to access foreign exchange. Many of them have resorted to the parallel market to source forex.
At a meeting of the National Economic Council (NEC) a few months ago, the CBN was directed to initiate measures that would bridge the gap between the official rate and that of the parallel market. Subsequently, the regulator announced a new forex policy, one of which was a $500m intervention to fund the banks in the country.
The idea was to help improve dollar liquidity. Under the new guideline, each bank is given $1 million weekly for sale to customers at half the premium that the parallel market charges. Before the CBN’s new forex intervention, travellers out of Nigeria were finding it difficult to access forex at the official market.
Also, the new guidelines mandated the banks to set up windows in the shortest possible time at major airports to ease the problem of travelers as they attempt to source forex. Such process, the CBN had directed, should be done at more competitive rates.
We believe that the forex market before now was badly run. Stability, transparency and constant vigilance are required. In the last few months, scarcity of forex has shot up the cost of production of goods. Let the banks comply with the CBN order or be made to face the consequences.
