The Central Bank of Nigeria (CBN) has defended its decision to stop the use of foreign exchange for the importation of certain goods.
This is contained in a statement signed by the CBN Director of Corporate Communications, Ibrahim Mu’azu, in Abuja on Friday.
The statement, which was made available to The Tide source said the CBN took the decision because it was important and the right thing to do.
The statement, which was in reply to “The Economist Magazine’s article of July 4, titled Toothpick Alert”, sought to further explain the CBN’s policy of restricted importation.
The article ignored some salient points, which made up part of the reasons that informed the decision of the apex bank, the statement said.
“First, the article seems to ignore the fact that the exchange rate is simply a price that is essentially determined by the forces of supply and demand.
“The CBN believes that the 48 per cent decline in oil prices may not be transitory and made bold policy changes including closure of the subsidised Official FX Window.
“This resulted in 22 per cent depreciation in the currency, the Naira.
“This is because the Nigerian economy is heavily dependent on imports and the exchange rate pass-through to inflation is high, we believe that this adjustment is optimal at this time.”
It stated that many other issues had to be considered.
“Contrary to the article’s argument, adjustments to a sharp decline in supply of U.S. Dollars cannot all be borne by an indeterminate depreciation, without considering the full impact on the Nigerian economy.
“The demand side also has to be considered, not just in response to the pressure on the Naira, but as an opportunity to change the economy’s structure, resuscitate local manufacturing, and expand job creation for citizens.
According to the statement, CBN believes that Nigeria cannot attain its full potential by importing anything and everything, saying the trend has weakened the operating capacities of Nigeria’s industries.
It said that now was a good opportunity to begin to reverse the trend of importation.
“Although the article hastily derides this idea as lacking in economic foundations, it is the same principles upon which many other countries do not allow importation of certain products.”
The statement said the article appeared condescending to suggest that the list of items seemed “to have been drawn up by someone wandering around a house and a building site”.
It said on the contrary, items were only included after thorough and exhaustive discussions at the highest policy making body of the Bank with the strategic national interest of Nigeria.
According to the statement, it is hoped that Nigerians will seize the opportunity to develop the country.
“Like other oil-exporting countries, Nigeria is grappling with its share of the aftermath of the oil price decline.
“Despite this, our economic fundamentals remain strong. Inflation is still within the CBN’s single-digit band, the exchange rate has stabilised around N197 per U.S. dollar for the last five months.
“GDP expanded by four per cent in the first quarter of 2015, and 469,070 new jobs were created in the same quarter.
“With ingenuity and productiveness, we believe that Nigerians will seize this opportunity and use it for the greater good of the country.
“As we are in a new administration in Nigeria, we must continue to ensure policy stability at all times”, it said.
Lawmakers Want CBN To Halt Naira Devaluation
The House of Representatives has asked the Central Bank of Nigeria (CBN), to urgently put in place a policy to check further devaluation of the naira to the United States dollar and other international legal tenders.
The House decried that while the Nigerian currency was losing value, others in Africa were appreciating.
At the plenary on Wednesday, the House unanimously adopted a motion moved by the Deputy Chairman of the Committee on Pensions, Mr Bamidele Salam, which warned the CBN of the implications of further devaluing the naira.
The motion was titled, ‘Matter of urgent public importance on the need for the Central Bank of Nigeria to urgently put in place monetary policies to stop the free fall of the naira against the dollar and other international legal tenders’.
Salam recalled that the CBN governor, Godwin Emefiele, while addressing the Bankers’ Committee at a summit on the economy in Lagos earlier in February, informed the committee about the naira devaluation against the dollar.
The lawmaker also quoted Emefiele as saying at the summit that the official exchange rate stood at N410 to the dollar.
“That is 7.6 per cent weaker than the rate of N379 published on the central bank’s website,” Salam noted.
According to the lawmaker, while the value of the naira relative to the dollar had declined by nine per cent in the last six months, the South African rand and Ghanaian cedi had appreciated by 11.4 per cent and one per cent, respectively.
Salam also recalled that the CBN adopted multiple exchange rates in 2020, in a bid to avoid an outright devaluation.
He noted that the official rate used as a basis for budget preparation and other official transactions differed from a closely controlled exchange rate for investors and exporters known as the Nigerian Autonomous Foreign Exchange Rate Fixing Methodology.
He stressed that the naira had traded in a tight range between N400 and N410, while the NAFEX rate was different from the parallel market, considered illegal by the CBN, where the naira closed at 502.
Salam said, “The House is concerned that devaluation is likely to cause inflation because imports will be more expensive any imported goods or raw material will increase in price; aggregate demand increases, causing demand-pull inflation. Firms/exporters have less incentive to cut costs because they can rely on the devaluation to improve competitiveness.
”The concern is that the long-term devaluation may lead to lower productivity because of the decline in incentives.
”The House is further concerned that devaluation of the naira makes it more difficult for Nigerian youths especially in the IT sector, whose businesses are online and must necessarily transact businesses in the US dollars.
“It also reduces real wages. In a period of low wage growth, a devaluation that causes rising import prices will make consumers feel worse off “.
Four West African Countries To Buy Nigeria’s Unutilised Electricity
Four West African countries, Niger, Togo, Benin and Burkina Faso, are collaborating to buy the unutilised power produced in Nigeria.
The Chairman of the Executive Board of the West African Power Pool (WAPP), Sule Abdulaziz, disclosed this at the WAPP meeting on the North core project in Abuja, on Wednesday.
Abdulaziz, who is also the acting Managing Director of the Transmission Company of Nigeria (TCN), said the four countries were collaborating to make the power purchase from Nigeria through the North core Power Transmission Line currently being built.
He explained, “The power we will be selling is the power that is not needed in Nigeria.
“The electricity generators that are going to supply power to this transmission line are going to generate that power specifically for this project. So, it is unutilised power”.
He said Nigeria was expecting new generators to participate in the energy export for the 875km 330KV Northcore transmission line from Nigeria through Niger, Togo, Benin to Burkina Faso.
Abdulaziz said, “In addition, there are some communities that are under the line route, about 611 of them, which will be getting power so that there won’t be just a transmission line passing without impact”.
The WAPP chairman noted that the project, funded by World Bank, French Development Council and the African Development Bank, had recorded progress, adding that the energy ministers would be addressing security issues for the project at another meeting in Abuja.
He said, “Nigeria has the greatest advantage among these countries because the electricity is going to be exported from Nigerian Gencos (generation companies).
“So, from that, the revenue is going to be enhanced and a lot of people will be employed in Nigeria”.
The Secretary-General, WAPP, Siengui Appolinaire-Ki, said the cost of the project was about $570 million, adding that part of the investment in each country would be funded by that particular nation.
According to him, the countries in the partnership, including Nigeria, are also being supported by donors.
He said the funding agreement was ready as partner countries were awaiting the disbursements.
Appolinaire-Ki, however, said the donor agencies had said they needed a Power Purchase Agreement between the buying and the selling countries to be executed before releasing the fund.
Reps Probe N275bn Agric Loans Under Yar’Adua, Jonathan, Buhari
The House of Representatives has resolved to investigate the disbursement of loans and credit facilities by the Federal Government in the agriculture sector since 2009.
The period under review covers the administrations of the late Umaru Yar’Adua, Goodluck Jonathan as well as the present President, Muhammadu Buhari.
The resolution was sequel to the unanimous adoption of a motion moved by Hon. Chike Okafor at the plenary last Wednesday, titled ‘Need to investigate disbursements of all agricultural loans/credit facilities to farmers from 2009 to date to enhance national food security’.
Okafor said, from 2009 to date, the Federal Government had approved the disbursement of funds to farmers in various schemes to the tune of over N275billion, ranging from Commercial Agricultural Credit Scheme to the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending, to help farmers improve agricultural production and guarantee food security in Nigeria.
The lawmaker also noted that apart from increasing food supply, the schemes were to grant agricultural loans to large and small-scale commercial farmers to lower the prices of agricultural produce, generate employment and increase foreign exchange earnings.
He said, “The House is aware that since the approval, most farmers have not been able to access the loans due to stringent requirements being demanded by banks from prospective borrowers and the alleged siphoning of over N105billion meant for farmers by management of NIRSAL.
“The House is concerned that food production has not attained the expected level, despite the approval of over N275billion facilities to farmers.
“The House is worried that the projected diversification of the economy from oil production to agricultural production and increase in agricultural output, food supply and promoting low food inflation will not be achieved if farmers are unable to access loans meant to increase agricultural production”.
Adopting the motion, the House resolved to mandate the Committee on Banking and Currency to “investigate disbursements and compliance of all agricultural loans/credit facilities to farmers from 2009 to date to enhance national food security in the country”.
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