If there is any doubt about the problems currently plaguing the forex policies of the CBN, then here you have sure proof to eliminate your doubts. One of the core tenets of the new forex policy is the allocation of 60% of all bank forex purchases to manufacturers. When giving its reason for such a decision, the CBN said that it was to stimulate the diversification of the economy by encouraging local industries and companies, which is seen as the solution to the country’s economic woes.
However, reports from all the three stakeholders, the CBN, the manufacturers and the commercial banks, indicate that the policy is not working as expected. All three participants are accusing each other of several inconsistencies.
As for the manufacturers, they are accusing the commercial banks of allocating forex only to the large and medium enterprises they are familiar with and not to small enterprises especially the new ones. Guardian reports that while some of the private sector operators got invitations from their banks to put forward their forex demands, others, mainly small-scale operators, are yet to get feedback from their banks for requests sent in more than two months ago.
CBN on its part is accusing the manufacturers of round-tripping instead of using the forex obtained for the purchase of machinery or expansion as allocated for. Guardian reports that a CBN official had specifically blamed the manufacturers for not deploying the forex they got in the past into good use, accusing them of round-tripping.
Round-tripping involves buying forex at the official rate only to sell it at the black market, where the exchange rate is higher and make a profit without doing any work. “Yes, we have had a series of complaints from manufacturers over this (access to forex), which is why we are going to meet with all the parties involved this week. The truth is, now they are complaining they are not getting forex, but when they were getting it, what were they doing with it? They were round-tripping with it. How many jobs did they generate on account of the forex they received in the past?” the official said.
The CBN however admitted that the apex bank would need to look into the problem of the commercial banks allocation of forex on a biased basis as any round-tripping by manufacturers is not an excuse for favoritism by banks.
The manufacturers , however, say that the CBN’s allegations are false as Dr. Frank Jacobs, President of the Manufacturers Association of Nigeria (MAN) said “How can you round-trip with what you cannot get? As it is today, manufacturers cannot get foreign exchange. No bank takes manufacturers seriously. They even laugh at us, telling us that the CBN cannot determine how they disburse the funds.”
Amid these accusations flying at each other, one wonders if the CBN really thought things through before giving the directive. For example, were the commercial banks part of the decision? What were the mechanisms they put in place to ensure that the banks actually implemented the directive properly?
As for the commercial banks, much has been said in the past as to their penchant for profits only, regardless of what the consequences are. If these accusations are true, the commercial banks obviously do not regard themselves as partners in the quest to lift the country of this economic mire. Rather, all they want is immediate profit.
Manufacturers themselves cannot be absolved of all blame totally as there could be some element of truth to the allegations of the CBN as regards round-tripping. All in all, it seems nobody is really interested in the long term benefit for Nigeria. It is all about what we can grab now.