Tightening measures still failed to stabilize the exchange rate in Nigeria – LCCI – Nairametrics

0

According to the Lagos Chamber of Commerce and Industry, the efforts of the Central Bank of Nigeria to save the naira by implementing tightening measures only shift foreign exchange transactions to third parties, putting increased pressure on the naira. change rate.

LCCI President Toki Mabogunje said this Tuesday during her State of the Economy speech.

She argued that the federal government should focus on securities linked to interest-free assets rather than debt, as they provide income and long-term growth.

What does the LCCI say?

She said, “It is noted, however, that whenever there is a free fall in the naira exchange rate in the parallel market segment, as we are currently seeing, the CBN applies demand containment and / or control measures. prices, as shown by the ban on 43 items and the quest to anchor the exchange rate of the Naira.

“Tightening measures have still failed to stabilize the exchange rate in Nigeria; it only redirects foreign exchange transactions to the underground arrangement, with unintended consequences of increased pressure on the exchange rate and creating a large premium between the official and parallel market exchange rate (N162 premium differential between the window I&E rate of N412 (CBN) and the parallel market rate of N574 (EIU).

Mabogunje went on to say that the forex market was still experiencing liquidity problems and many investors were unable to obtain foreign exchange for the import of raw materials, equipment and other essential inputs for manufacturing and processing. transformation.
The LCCI applauds the implementation of the Nigerian Autonomous Exchange Rate as the official exchange rate, according to it.

She said, “Unification should improve the country’s currency management framework as multiple exchange rate systems created problems of uncertainty and sources of arbitrage.

“Development should strengthen the confidence of foreign investors in the economy. The move will also help the country unlock external financing opportunities, especially from key multilateral institutions such as the World Bank and the IMF, which have long advocated for a unified and flexible exchange rate system.

She added that it was necessary for the CBN to step up its intervention efforts and roll out more favorable policies on the supply side to boost liquidity in the market.

Mabogunje said insecurity could worsen the 2021 budget deficit in light of weak revenue mobilization. According to her, the insecure situation in the country has made its economy a dangerous destination for private and foreign investment.

She added that the Nigerian economy grew 2.7% in the second quarter of 2021, on par with population growth, adding that Nigeria’s real output was still below pre-COVID-19 levels.

Speaking on the nation’s debt, Mabogunje said: “According to the Presidential Economic Advisory Council on the basis of the actual revenue generated in the first half of the year, the increasing cost and proportion of revenue used for public debt service, i.e. 98% of revenue, creates fiscal distortions in significant proportions.

“The Director General of the Debt Management Office said that 43% of revenue is budgeted for debt service, based on debt service and projected revenue for 2022.

“Given that the fundamentals of incomes are currently weak, the ideal is to reduce the cost of borrowing, in particular the high deficit and the cost of the debt projected under medium-term expenditure (CDMT 2022-2024) .

She added that the federal government should focus on interest-free securities linked to assets other than debt, as they unlock income and long-term growth.

Mabogunje said the FG should allow the private sector to invest in some commercially viable infrastructure projects to generate income for repayment of funds spent.


Source link

Leave A Reply

Your email address will not be published.