The Central Bank of Nigeria has evolved several policies regarding the forex exchange in the past few months that are becoming too many to list. However, many of these policies seem not to be having the desired effects, such as the satisfaction of forex demand for local companies.
In its latest action, the CBN was able to have a picture of just how large the unmet demand for forex is among Nigerian companies. The chief executives of deposit money banks (DMBs) were asked to sign undertakings to open new letters of credit (LCs) equivalent to the amount of forwards receive for each of the sectors and the results showed that a huge $815 million worth of forex was still unmet among Nigerian businesses.
Demand from agriculture and agriculture-related companies was $31,941,640.73, while airlines demanded $216,738,717.57 which represented the highest proportion. $167,638,045.08 was demanded by machinery or manufacturing while demand for raw materials was $397,890,132.44.
This is coming on the back of complaints by manufacturers and other local companies that they lack the forex required to continue their operations profitably in the country. In order to block off some of this huge unmet demand, the CBN released $313,916,711.09 to Nigerian banks for onward sale to their customers through Special Secondary Market Intervention Retail Sales (SMIS), ThisDay reports.
It is now hoped that other players in the deal, i.e. would play their part and actually use the forex for what it is meant for. Accusations of banks refusing to allocate forex fairly, manufacturers round tripping the forex allocated to them and so on have been flying in the air recently. With this intervention, the CBN must carefully monitor other steps in the process to ensure that the funds are properly implemented.