Economists at the Centre for the Promotion of Private Enterprise, an economic think tank, have said that to save the naira and help industries grow, the Central Bank of Nigeria (CBN) should review its policy on forex restriction for import of over 40 items.
They said increase in dollar liquidity would boost the economy.
In its economic and business environment review for 2021 and agenda for 2022, the centre said the CBN’s current forex policy regime was negatively affecting investors, manufacturers and other stakeholders, hence the need for the apex bank to engage stakeholders.
CPPE further noted that some of the banned items are intermediate products for some manufacturing firms which have negatively impacted some manufacturers, necessitating the review.
The economists advised the CBN to adopt a flexible exchange rate policy regime, and allow the pricing mechanisms to reflect the demand and supply fundamentals in the foreign exchange market.
“We would like to clarify that this is not a devaluation proposition.
“Rather, it is a pricing mechanism that reflects the demand and supply fundamentals in the foreign exchange market. It is a model that is sustainable, predictable and transparent. It is a policy regime that would reduce uncertainty and inspire the confidence of investors.
“It is a policy framework that would minimise discretion and arbitrage in the foreign exchange allocation mechanism. A flexible exchange rate regime is a policy choice adopted to cope with changing demand and supply conditions in the forex market.v”
The centre said adopting a market rate would deepen the autonomous foreign exchange market by liberalising inflows from export proceeds, diaspora remittances, multinational companies, donor agencies, diplomatic missions, and others.
It further pointed out that a flexible exchange rate would enhance liquidity in the forex market, increase investors’ confidence, and ensure a more transparent model for forex allocation.
The CPPE also observed that the Cash Reserves Requirements (CRR) imposed on Nigerian banks by the CBN is one of the highest globally, and a major impediment to financial intermediation by banks, adding that some of the banks have a CRR of 50 per cent and more against the official CRR of 27.5 per cent.
