The Manufacturers association of Nigeria wants the Central Bank of Nigeria to stop selling forex to Bureau De Change operators, Thisday reports. According to the association, they believe that rather than sell to BDC’s (who they claim do not add value to the economy) forex should be sold to manufacturers who they believe are the productive sectors of the economy.
“The association appreciates the challenges the country is passing through at the moment and we will do everything possible to support the federal government to overcome the situation. Towards ameliorating the situation, the CBN should stop funding the BDC market. It is difficult to understand that these outfits should depend on the official allocation of forex by the CBN for their survival. The BDC markets should provide alternative funding window to the economy, in which case they would source their forex independently from other sources and supply to the forex market.”
The Manufacturers association also proposed a rather strange policy of “guided deregulation” where the naira will be allowed to “float freely within the bracket that the CBN wants”.
“MAN would also like to advocate the use of guided deregulation such that the naira would be left to flow freely within a bracket which the CBN would determine. This is important, at our stage of development. We cannot afford to allow the Naira to flow freely without any check. MAN believes that this arrangement will allow the exchange rate to be determined by the market but with some moderation and also leave room for investors to be attracted to invest in the country,”
The recommendations above seem in line with the thinking of the CBN going by several pronouncements made by officials of the Apex bank in recent weeks. The CBN’s director of monetary policy Moses Tule, had mentioned last week that the CBN’s priorities are 1) for the settlement of matured Letters of Credit (LCs) opened for importation; 2) for the importation of petroleum products until such a time either when we have our refineries fully operational and; 3) for the importation of raw materials. It is therefore not surprising that MAN will support a situation where ordinary Nigerians are stifled of accessing the forex market to meet their domestic needs. This can be likened to a hostage situation perpetuated by the CBN in collaboration with MAN against Nigerians.
The idea of a guided deregulation is also confusing as the CBN cannot on one hand allow the Naira to float and then hope to still control prices. It is either they continue with their “managed float system” where they remain the sole seller of FX and as such determine prices or they let the naira float freely and intervene at the market price. Either way Manufacturers will still have to buy forex at market determined prices and may even so still face shortages. The reality of our reserves suggest Manufacturers more than any other group should focus more on exporting their products to earn forex which they can use for their inputs.