The Lagos Chamber of Commerce and Industry (LCCI) says strategies by the Central Bank of Nigeria(CBN) to save the naira are proving counterproductive as they have only succeeded in redirecting forex transactions to third parties and increasing pressure on the exchange rate.
LCCI said operators are still experiencing liquidity challenges, particularly inability to access foreign exchange for the importation of raw materials for production.
President, LCCI, Toki Mabogunje, said at a press briefing on the state of the economy that the situation is taking a huge toll on capacity utilisation as well as recovery and sustainability of businesses in the production sector.
“It is however noted that whenever there is a free fall of naira exchange rate at the parallel market segment, as we are currently witnessing, the CBN applies demand containment and/or price control measures as seen from the 43 items ban and quest to peg the exchange rate of the Naira.
“Tightening measures have always failed to stabilise the exchange rate in Nigeria; it only redirects FX transactions to the underground arrangement, with unintended consequences of increased pressure on the exchange rate and creating wide premium between the official and parallel market exchange rate (N162 premium gap between I&E window rate of N412 (CBN) and the parallel market rate of N574 (EIU)),” she added.
Mabogunje said the LCCI welcomes the adoption of the Nigerian Autonomous Foreign Exchange Rate as the official exchange rate.
She said, “The unification is expected to improve the country’s currency management framework given that the multiple exchange rate systems had been creating uncertainty issues and sources of arbitrage.”
She further emphasised the need for the CBN to scale up its intervention efforts and roll out more friendly supply-side policies to boost liquidity in the market.
According to her, Nigeria’s actual output performance is still below its potential output level as recorded in the pre-Covid-19 period, pointing out that achieving key development outcomes such as employment creation and poverty reduction will always remain elusive in the light of fragile recovery.
The LCCI president reiterated the need for policymakers to pursue critical reforms to bolster confidence in the economy, accelerate post-pandemic recovery and alleviate poverty.
