Friday, January 29, 2016
Thursday, January 21, 2016
Why The CBN Prioritized These Four Needs Above Any Other
The Central Bank yesterday laid out its reasons for banishing BDC operators from its
official window further confirming the arbitrage and round tripping that has
been going on for months. The CBN is said to sell on $10,000 per week per BDC
confounding critics who believe banning them from its official window is paper
over cracks and won’t change anything.
However, CBN did confirm in its press briefing that it
will from now on only sell forex to 4 class of needs which it laid out in order
of priority;
1.
Matured
Letters of Credit from Commercial Banks
2.
Importation
of Petroleum Products
3.
Importation
of critical Raw Materials, Plants, and Equipment
4.
Payments
for School Fees, BTA, PTA, and related expenses
The list
above provides a vivid understanding of the priorities of the CBN and to a
larger extent the mindset of the President. If they are to indulge demand for
the little forex they have then it has to be for something that can add value
to the economy or fit into their socialist goals. For example, granting access
to the CBN window allows importers pay for their forex obligations abroad and
allowing them stay in business and remain competitive. It is also an obligatory
requirements that the CBN needs to fulfill lest it risk our ability to import
essential items such as medical supplies, food, vehicles etc.
Allowing
access to the forex market for importation of petroleum products helps the
government in two ways. It keeps fuel price down thus ensuring ‘all’ Nigerians
‘continue’ to purchase it at the official rate. In the same vein the government
will not need to pay for fuel subsidy which it will incur should it devalue the
naira or allow a free float. This also fits in well in its socially driven
policies.
Importation
of critical raw materials, plants and equipment is essential for the
industrialization and infrastructural development promised by the government.
To build bridges, rail lines, roads, factories, improve power supply, Nigeria
will have to import the materials and equipment essential to power the economy.
For example, the CBN made it clear over the weekend that it would provide the
forex required for Dangote to source plants and equipment for its refinery.
Continuous
supply of dollars to cater for the demand for forex for payments for School
Fees, BTA, PTA, and related expenses are an obligation that they have to make
for Nigerians especially the middle and upper middle class. Taking them out
will draw huge resentment from more vocal supporters and critics of the
government and will be bad PR. Rather than take them of this list officially,
they rather have it in there even if it’s down in the pecking order or may not
even be catered to.
If your
business falls outside this space, then you might as well get used to paying
premium price just to fulfill your forex obligations. The CBN is thus not
willing to support transactions that are not essential to driving the economy
forward through job creation and economic stimulus.
The post
above and its ensuing comments, if any, is purely the opinion of the writer(s).
It therefore should never be considered as an investment advise of any sort. If
required, readers should please consult a competent professional financial
adviser for any investment decision.
http://nairametrics.com/why-the-cbn-prioritized-these-four-needs-above-any-other/
Tuesday, January 12, 2016
CBN may relax forex restriction on imports this week
Consequent upon pressures and the open admonition by Senate President
Bukola Saraki, and made more intense by the Managing Director of the
International Monetary Fund (IMF), Christine Lagarde, the Central Bank of
Nigeria (CBN) may relax its policy on forex on importation of 41 select items
soon.
It was learnt that apart from the call made in the open by the Senate
President during last week’s audience with the IMF boss on the CBN, it has also
been revealed that Lagarde pointed out, in unequivocal terms, the dangers of
the continued forex policy instituted by the apex bank in the last eight
months.
The CBN yesterday said commercial banks in the country can now accept
deposit in foreign currency once again after the it lifted the ban on deposits
into domiciliary accounts.
CBN governor Godwin Emefiele, who announced this yesterday in Abuja,
said the lifting of the restriction was to allow the banks build liquidity in
forex and meet some of their demands.
He said the ban was necessitated by what he called dollarization of the
economy by many Nigerians.
The move also raised hopes for reversal of the import restriction policy
which was place in July last year.
During the closed door sessions between the CBN governor, Godwin
Emefiele, and Senate President Saraki on the one hand, and another with
Lagarde, there appeared to be a drift towards a consensual position on the
restrictive forex policy.
Although Emefiele, according to a source at the private sessions, did
not give away much regarding the apex bank’s possibility of a policy review, in
the light of the expected visit from IMF economists this week, the policy may
be relaxed.
The foreign exchange market witnessed introduction of several foreign
exchange restrictions in 2015.
The first notable restriction was the closure of official foreign
exchange market (Retail Dutch Auction) on February 18, 2015 which translated to
further devaluation of the naira to N197 per dollar from N165 per dollar
http://shipsandports.com.ng/cbn-may-relax-forex-restriction-on-imports-this-week/
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