The Central Bank yesterday laid out its reasons for banishing BDC operators from its official window further confirming the arbitrage and round tripping that has been going on for months. The CBN is said to sell on $10,000 per week per BDC confounding critics who believe banning them from its official window is paper over cracks and won’t change anything.
However, CBN did confirm in its press briefing that it will from now on only sell forex to 4 class of needs which it laid out in order of priority;
- Matured Letters of Credit from Commercial Banks
- Importation of Petroleum Products
- Importation of critical Raw Materials, Plants, and Equipment
- Payments for School Fees, BTA, PTA, and related expenses
The list above provides a vivid understanding of the priorities of the CBN and to a larger extent the mindset of the President. If they are to indulge demand for the little forex they have then it has to be for something that can add value to the economy or fit into their socialist goals. For example, granting access to the CBN window allows importers pay for their forex obligations abroad and allowing them stay in business and remain competitive. It is also an obligatory requirements that the CBN needs to fulfill lest it risk our ability to import essential items such as medical supplies, food, vehicles etc.
Allowing access to the forex market for importation of petroleum products helps the government in two ways. It keeps fuel price down thus ensuring ‘all’ Nigerians ‘continue’ to purchase it at the official rate. In the same vein the government will not need to pay for fuel subsidy which it will incur should it devalue the naira or allow a free float. This also fits in well in its socially driven policies.
Importation of critical raw materials, plants and equipment is essential for the industrialization and infrastructural development promised by the government. To build bridges, rail lines, roads, factories, improve power supply, Nigeria will have to import the materials and equipment essential to power the economy. For example, the CBN made it clear over the weekend that it would provide the forex required for Dangote to source plants and equipment for its refinery.
Continuous supply of dollars to cater for the demand for forex for payments for School Fees, BTA, PTA, and related expenses are an obligation that they have to make for Nigerians especially the middle and upper middle class. Taking them out will draw huge resentment from more vocal supporters and critics of the government and will be bad PR. Rather than take them of this list officially, they rather have it in there even if it’s down in the pecking order or may not even be catered to.
If your business falls outside this space, then you might as well get used to paying premium price just to fulfill your forex obligations. The CBN is thus not willing to support transactions that are not essential to driving the economy forward through job creation and economic stimulus.