The Manufacturers Association of Nigeria has thrown its weight behind the Central Bank of Nigeria’s stoppage of sales of forex to Bureau de Change operators.
It said this in a statement made made available to our correspondent in Lagos, stating that the CBN move has reinforced its various submissions on the need for the “CBN to collapse the various forex windows into a single official forex window.”
In the statement signed by the Director-General,MAN, Mr Segun Ajayi-Kadir, the body said it believed that a single forex window “will eliminate the excesses of middlemen, safe the value of Naira and allow for available forex to be allocated productively using the official banking protocols.”
Recall that while announcing the stoppage, the CBN said the parallel market had become a conduit for illicit forex flows and graft.
The CBN said it woud also call off the processing of applications for for BDC licences in the country.
The added that the major challenge with forex allocation to BDC segment “is that the operators always lacked the ability and will to continuously adhere to set guidelines.”
MAN added, “Most times their operations drift into round-tripping and other financial incongruities which negate the overall objectives of creating the BDC forex market.
“The end result was always the escalation of the premium of forex in BDC compared to the Official window and further depreciation of the Naira.
“Perhaps the history of BDC forex market may have the answer to this challenge. The truth is that most operators in the market came from the so called ‘Black market.’
” Unfortunately, the inappropriate modus operandi in the Black Market followed these operators to the BDC, even with CBN’s regulation.
“An observation of the forex market scenario shows that in 2019 CBN forex allocation to BDCs was about $12.65 billion and only $1.33 billion to the Interbank, while the premium of BDC rate to that of Interbank averaged 17% in last three quarters of the year.
“The trend may suggest that forex operations at the BDC market has gone out of control. The dominance of BDC market has unpleasant implication for the manufacturing sector.
“Manufacturers source forex at the BDC window at exorbitant cost, notwithstanding the consequent implication on cost of production and competitiveness of the sector.”
The MAN added that in the face of the new policy, “it is important therefore, that the available forex policies and guidelines should be appropriately reviewed to support manufacturing, particularly at this precarious time.”
It further stated that the issues of usage of Forex’, exclusion of items from the official forex window and concessional forex allocation to critical manufacturing should be reviewed to ensure a production- enabling forex management in the country.