The Lagos Chamber of Commerce and Industry (LCCI) on Wednesday said the biggest challenge facing investors currently is the dislocations caused by the recent foreign exchange policies of the Central Bank of Nigeria (CBN).
Speaking at 2015, third quarter press conference, the President of LCCI, Alhaji Remi Bello, said the chamber appreciates the challenge of scarcity of foreign exchange as tough choices have to be made, but that the chamber has serious reservations over the policy choices of the CBN in managing the current crisis.
He said the CBN should put in place policies that would encourage inflow of forex without necessarily creating a tolerance for money laundering, adding that, the chamber believes this can only be done through intelligence.
“Significant disruptions, distortions and dislocations have been created in the business environment by the CBN as a consequence of the following policy measures: restrictions on the use of export proceeds, denial of access to foreign exchange market for 41 broad categories of products, including critical inputs needed in manufacturing and service sectors, prohibition of cash lodgements into domiciliary accounts and tight exchange controls and admintrative allocation of foreign exchange are typically characterized by lack of transparency, corruption and considerable abuse” he stated.
He noted that the economy is now faced with a scenario where there is much greater pressure to move funds out of the economy than move funds into the economy.
“This can be likened to a run on a system. This is a typical scenario which a confidence crisis would create. Future international trade transactions, financial and investment relations are now at risk. Round tripping of forex has continued to flourish because of the disparity in the exchange rate between the official and parallel market. Inflow of forex into the two autonomous sources has been adversely affected. It is worthy of note that Diaspora funds into the country was about $23 billion in 2013. The current policy will discourage the inflow of such funds which normally help to strengthen the supply side of the foreign exchange,” he said.
According to him, the sovereign risk perception of Nigeria has worsened over the last months and several credit lines for Nigerian investors have been lost following the numerous cases of payment defaulted to foreign suppliers.
“Even reputable blue chip companies have defaulted for the first time in the several years of business relationship with their foreign suppliers. Considerable damage has been done to the image of many companies and the country in the international trade and investment arena. A major confidence crisis has been created for investors,” he stated.
On the way forward, Bello said, the CBN should be compelled to engage with relevant economic ministries in order to bring about coherence in the management of the Nigerian economy.
“These other key ministries and agencies include the Nigeria Customs Service, Federal Ministry of Finance, National Planning Commission and Federal Ministry of Trade and Investment.
“There has to be proper coordination between the key ministries and the CBN to give a credible direction to the economy and ensure a better quality of economic management.
“The decision to prohibit the lodgement of cash into domiciliary accounts should be reviewed. This is hurting the economy especially the Small & Medium Scale Enterprises (SMEs) and the informal sector,” he said.
Bello said there were several small and urgent transactions that can not wait for the bureaucracy of Form A and Form M which are needed to meet exigencies of business operations such as the raw materials or spare part that need to be urgently procured.
“These are not transactions that cannot wait for bureaucracy of Form A and M. So there should be a window that allows for speedy transactions through cash lodgement into domiciliary accounts. A threshold of maximum lodgements per pay may be allowed for individuals and a different limit for corporate bodies,” he said.
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