Last month (June 2016) the Central Bank of Nigeria (CBN), through its governor, Godwin Emefiele, formally unveiled the much-awaited flexible foreign exchange policy to allow the foreign exchange interbank trading window to be driven purely by market forces with the removal of controls on the naira, allowing increased dollar supply in a bid to support the country’s frail economy.
Following the operations of the policy, most manufacturing company suffered losses of approximately N348.6bn.
The major reason for the loss is because of the outstanding Letter of Credit and dollar requests filed when the Naira exchange rate was 197 to a dollar summed up at $4.02bn
The aggregate amount bidded for by the manufacturers under the former exchange rate of N197 to a dollar was N827.4bn, but the amount they were asked to pay based on the new rate was N1.176tn. The manufacturers were required to come up with the difference of N348.6bn.
The pricing of their goods at the current parallel rate of N360 to a US Dollar since the new exchange rate of N280 became operative has been of great concern.
As expected, manufacturers are not pleased with this policy as it has cost them so much loss in business. They said more job losses and companies closures would be the consequence of making them to pay the difference between the old and new exchange rates.
“A total of $532m was bought on the spot, the remaining $3.47bn was debited forward as future payments to be made over a period of one to three months. That was supposed to make everybody happy; but unfortunately, that was a bit in the bad case. It was in a bad case because even the $3.47bn was debited to all the banks on that same Monday of June 20 and Tuesday, June 21,” a manufacturer regretted after the new foreign policy was enforced.
He further commented : “They took money that manufacturers did not even plan to pay and they debited every bank for their customers that were on that list on that day. They debited them forward for forex they were not going to get for the next three or four months. The future funding has interest implications. So, it is not actually an exposure of N280 anymore, it is N280 plus one to three months’ interest, depending on the length of time allowed for the future payment.”
Not only manufacturing companies are bearing the heat of the moment, foreign airlines too, as they have about USD575 million stuck in Nigerian banks, hence the reason for their recent increase in fare.
Economists have justified the decision of the CBN given the need for Foreign Exchange Principal Dealers to have sufficient liquidity, capital base and assets to independently source for Foreign Exchange.
In the long run, if the new forex policy becomes favourable, the truth is, there is much expected from Nigeria’s apex bank and her administration to cushion the effect of this policy on manufacturers and other sectors.
SeyifunmiAdebote for encomium.ng