The Central Bank of Nigeria on Tuesday frowned at the growing practice of trading goods and services in foreign currencies instead of the Naira in Nigeria.
The Bank’s governor, Godwin Emefiele, said in Abuja at the end of the Monetary Policy Committee meeting that it is illegal for landlords or school proprietors to demand rents or fees in dollars, while transacting other businesses in foreign currencies.
“The official currency for doing business in Nigeria remains the Naira. Collecting rents or school fees in dollars in Nigeria is illegal. We like to advice those involved in these practices to desist from them, because CBN would very soon begin to go after them,” Mr. Emefiele warned.
The CBN governor, who spoke on efforts to check the pressures on the Naira as a result of the unnecessary demands for foreign exchange, said steps must be taken to prevent the dollar dominating the country’s economy.
Mr. Emefiele denied prioritizing the sale of foreign exchange to foreign investors, explaining that all such transactions on a daily basis were only to people with effective demand in line with its policy.
He said attempts to meet the demand by foreign investors for foreign exchange was part of the promise of unhindered access to the country’s foreign exchange market to support their needs to raise funds so as to encourage them come to invest in the country.
On transparency of the market, Mr. Emefiele explained that the closure of the official foreign exchange market was to remove rent-seeking activities or opportunities for people who felt they wanted to take advantage of the vulnerabilities in the FOREX market.
All foreign exchange transactions, he said, are now done in the open, pointing out that with these steps, there was no way JP Morgan would not remove Nigeria from the watch list of those with liquidity issues in their economy in due course.
On the outlook of the Naira, the CBN governor said the outlook based on the interbank rate N198 to the dollar, was appropriate, given the pressures seen in markets as a result of the drop in crude oil prices and the impact the national currency.
He said a number of measures still need to be taken, including deepening the market, improving supply and looking at areas where demand pressures or inefficiencies could be cut.
“We are optimistic that after the elections confidence in the currency and economy will improve. Elections will come and go, Nigeria will remain and business will continue as usual. The economy will remain resilient and in the upward direction.
On foreign reserves, the governor said the level was good enough to support five to six months of imports, adding that he believed this was good enough to support business and the economy.
In the communique issued at the end of the meeting, the governor said members resolved to keep the indices unchanged, as the previous decisions needed time for their effects to fully impact the economy.
Consequently, monetary policy rate, which is the lending rate for banking activities, was retained at 13 per cent, while cash reserve ratio on private sector deposits was left at 20 per cent.
While CRR on Public Sector deposits was unchanged at 75 per cent; the committee allowed liquidity ratio at 30 per cent.
A review of the macro economy, he said, showed that core inflation continued to sag due to the dampening effect of low oil prices and lack of appreciable wage gains.
Average inflation for the developed economies, he said, was projected to remain flat at 1.5 per cent in 2015 due to the increasing output gap, weak recovery, and strong regional currencies.
National Bureau of Statistics estimate, Mr. Emefiele noted, showed that real gross domestic product growth rate stood at 5.94 per cent in the 4th quarter of 2014, lower than the 6.77 per cent in the corresponding period of 2013 and the 6.23 per cent third quarter 2014.
Headline inflation remained within the 6 to 9 per cent band set by the CBN, though the Committee express concern at the gradual increase in the year on year headline inflation during the first two months of the year from 8 per cent in December 2014 to 8.2 per cent in January and further to 8.4 per cent in February 2015.
He traced the underlying inflationary pressures from imported food and the core components, with food inflation rising from 9.2 per cent in December 2014 to 9.4 per cent in February 2015, while core inflation grew from 6.2 to 7 per cent during the same period.