Manufacturers and industrialists under the Orgnasised Private Sector (OPS) have called on the Central Bank of Nigeria (CBN) to review it foreign exchange policy and return to Wholesale Dutch Auction System (WDAS) regime for improved forex supply to the real sector.
The WDAS allows Authorised Dealers – mainly commercial banks- to submit dollar bids to the CBN for purchase of forex during an auction. Once their bids are successful, they then sell the dollars to the Bureaux De Change (BDCs) and other end users.
Unlike the WDAS, the Retail Dutch Auction System (RDAS) is based solely on actual demand of forex by the end users of the forex. As such, the Authorised Dealers will only bid for forex based on the number of actual request it has received from its end users.
In a joint report released yesterday, the OPS- the Lagos Chamber of Commerce and Industry (LCCI) and Manufacturers Association of Nigeria (MAN) said manufacturers and other real sector operators have been facing acute forex scarcity, making it difficult for the operators to pay foreign suppliers.
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MAN President, Mansur Ahmed, therefore called on the regulator to review the forex restriction policy on some raw materials and grant concessional forex allocation to critical manufacturing sectors.
He therefore advised the apex bank to review forex policy by unifing all exchange rates and reintroduce WDAS regime. They said such policy shift would improve forex access and support manufacturers in importing local inputs.
Continuing, Ahmed said variability and depreciation in exchange rates value are obstructing economic and manufacturing activities, adding that naira value depreciation have led to increase in the prices of manufacturing raw-materials and machinery imports.
“The high cost import bill for the productive inputs decreases manufacturing working capital and feeds into commodities prices, making the sector less competitive. In addition, COVID-19 rode on the wings of the low international commodity prices, particularly crude oil prices, to trigger the prevailing forex crisis,” he said.
He added that a fourth quarter 2020 survey showed that most manufacturers were unable to adequately source forex for importation of productive raw-materials and machinery that are not available locally.
“Moreover, because sourcing forex in the official market has become extremely difficult, operators are daily approaching the Bureau De Change (BDC) segment notwithstanding the high cost implication”.
Also speaking, LCCI President, Mrs. Toki Mabogunje called for a review of the forex management framework to expand the scope of market mechanism in the determining the exchange rate.
She said that the unification of the exchange rates should be prioritised for quick economic recovery and boosting investors’ confidence in the economy.
“While the Lagos Chamber appreciates efforts of the CBN in preserving the scarce foreign exchange resources at a time the country is faced with relatively lower oil price and production, we reiterate our position that a disproportionate reliance on demand management strategies is not a sustainable solution to the recurring foreign exchange crisis.”
“In year 2021, we urge the CBN to de-emphasise demand management policies and intensify efforts at improving the supply side of the foreign exchange market,” she said.
The LCCI boss lauded the CBN’s policy mandating International Money Transfer Operators (IMTOs) to pay Diaspora remittances beneficiaries in dollars.
“The policy is a step in the right direction in resolving the liquidity issue in the currency market by ensuring availability of foreign exchange, especially at the retail segment. This should be replicated for other sources of inflows such as export proceeds, Foreign Direct Investment, and Foreign Portfolio Investments,” she said.
“Robust remittance inflow is expected to moderate forex pressure and narrow the wide parallel market premium as economic agents would have access to a harmonised rate,” she said.
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