Monday, August 29, 2016 9:07 am
The Lagos Chamber of Commerce and Industry (LCCI) has urged the Central Bank of Nigeria (CBN) to review its suspension of nine banks from transacting on the foreign exchange market.
The LCCI Director-General, Mr Muda Yusuf, made the appeal in a statement on Sunday in Lagos.
According to Yusuf, policy actions and pronouncements that can impact the foreign exchange market should be done with utmost caution and care.
“For an economy that is in fragile mode and that is highly exchange rate sensitive, it is imperative to avoid unintended consequences, which may hurt the economy in very profound ways.
“The recent suspension of nine banks from the forex market is a shock that the economy can ill afford at this time.
“It is right to penalise banks for proven infractions, but this should be done in a way to minimise collateral effects on investors and the larger economy.
“This is even more so at a time when the economy is grappling with a major confidence issue in the forex market.
“There should be more creative and less disruptive ways of imposing such sanctions,’’ he said.
The LLCT director-general said the Apex Bank’s decision had stalled ongoing foreign exchange transactions in affected banks with investors and citizens bearing the consequence in exchange rate hike.
The News Agency of Nigeria (NAN) recalls that the apex bank had suspended nine banks on Aug. 23 over alleged failure to remit crude oil sales revenue.
The affected deposit money banks are; First Bank of Nigeria, Diamond Bank, Sterling Bank, Skye Bank Plc, Fidelity Bank, Keystone Bank, First City Monument Bank (FCMB) and Heritage Bank.
The United Bank for Africa (UBA), initially listed among the suspended banks, was readmitted into the foreign exchange market on Aug. 25 after clearance of its outstanding remittances.
According to Yusuf, instability and inconsistency in foreign exchange management policy continues to create uncertainty in the forex market, thereby deepening liquidity challenges.
He said further that the chamber was concerned with the crowding out of other sectors, apart from manufacturing, from the foreign exchange market allocations.
According to him, the other sectors account for over 85 per cent of the country’s Gross Domestic Product (GDP) and employment in the economy.
“They all have varying import contents in their operations. Therefore, if a minimum of 60 per cent of all forex allocation goes to manufacturing for raw materials and machineries, what happens to other sectors?
“Currently, petroleum products imports are priority and could take another 25 per cent of foreign exchange. This implies that the rest of the sectors would have to settle for the balance of 15 per cent.
“This is clearly not a sustainable framework.
“It could only create more confusion in the foreign exchange market,’’ the LCCI boss said.
He added that it was critical to recognise the interdependence of sectors and the integrated role that they perform in complementing one another for the economy to function properly.
“This is not to diminish the critical importance of manufacturing to the economy. But we should realise that other sectors play important roles as well.’’
The director-general said that fiscal policy measures were better suited for addressing sectoral imbalances than monetary policy.
According to him, the key role for monetary authorities is to ensure that financial markets are efficient, and transparent, and to ensure discipline among players.
Yusuf noted that the CBN circular on sectoral allocations did not indicate any Harmonised System (HS) Code to properly define raw materials and machineries.
“The result of this will be discretionary interpretation by the banks as to what qualifies as raw materials and machineries,’’ he said.
The LCCI boss urged the government to moderate inflationary pressures and ease poverty conditions by reviewing import duty regimes and the various trade facilitation issues at the nation’s ports.
He said it was too much of a shock on the economy to combine high import duty regimes with a weak and rapidly depreciating currency.
“Conversion of import values at current exchange rates for purposes of computation of import duty and other port charges have escalated costs beyond measure and have paralysed many businesses,’’ Yusuf said.
He stressed that the review should be done without undermining the current economic diversification drive. (NAN)