The Biggest Winners And Losers From CBN’s New Forex Policy
Nairametrics| The sudden announcement of a new forex policy by the CBN caught most people by surprise. It certainly wasn’t expected this soon and without any fanfare, despite the pressure the apex bank has been under recently to adjust its policy. However, rather than float the Naira, the CBN decided to boost the supply side by releasing more forex into the market. What could this mean for the various players in the forex market? We take a look by identifying the possible losers and gainers from the CBN’s latest action.
Commercial Banks: they must be rubbing their hands in glee right now. With the new policy, banks can access as much forex as they want and supply just as much as they want. In a situation where commercial banks are totally law-abiding, this would mean less complaints from customers, increased trade volume etc. However, with the appeal of accessing as much as they like, the temptation to engage in round-tripping and forex hoarding to indirectly manipulate the market has never been higher. The power now lies in their hands
Abokis and the parallel market: In an ideal situation (which hardly ever happens in Nigeria, the parallel market should be jittery at this policy change. At the worst (for them), very Nigerians need to patronize them as the supply should be boosted. As the 41 banned items are not mentioned in the new policy, users of these may end up as the only customers of the parallel market, if the CBN is able to keep up with the forex supply (which is very doubtful). At the very least, even the parallel market should have more inflow of forex and this should result in stiffer competition and reduced rates. The initial jump in the parallel market rates was expected as players speculate on how exactly the situation would work out.
Bureaux de Change: BDCs were not mentioned in the adjustments to the policy, so it is expected that they continue obtaining dollars as they do now, with the only possible problem being the increased competition from the banks who now have a larger role to play in the supply side. BDCs may now have to find ways of handling this competition which may impact on their sales.
Nigerian Travelers: As much as I would like to categorize them as business people, many Nigerians traveling are doing so for other reasons. Whatever the reasons, if all goes to plan, they do not need to queue, lobby and wait to access what they need for their travels. At any rate, the options available for them are now wider.
Forex reserves: If ever there was a system that is exposed to criminal inclinations, this is one. The CBN still needs to develop a stricter approach to monitoring the activities of the commercial banks. If not, we could be draining our reserves with no perceptible change in the value of the Naira. Besides, why not just activate a full float of the Naira?