Industrialists, manufacturers and financial experts have reacted to the Naira for Dollar Scheme, an initiative of the Central Bank of Nigeria.
The CBN last week directed all Deposit Money Banks and International Money Transfer Operators to henceforth pay recipients of diaspora remittances N5 for every $1 received as remittance inflow.
In separate interviews with PREMIUM TIMES, analysts said although the policy had the potential to boost Nigeria’s foreign reserve, they were not so optimistic about its effectiveness.
“The policy is an experimental idea designed to encourage more people to bring in money through the official channels,” said Tope Fasua, an economist.
“And of course, the IMTOs have been instructed to pay dollars, so CBN is trying to max out inflows from this channel.
“It’s a point to note that just this week the CBN said they had seen a phenomenal increase from N5 million dollars per week to $30 million, I could have been more cautious to see how that sustains but why not if not.
“Let’s see how it works out.
“Some people believe that this additional N5 is a sort of devaluation, but I think we should give the policy a chance and see how it works out.
“Some of the policies being pushed out are bold and hopefully, they will achieve their objectives.
Also, senior economist at SPM Professionals, Paul Alaje, said the new policy may not afford the country a huge increase in foreign reserve as intends.
“If people can still make their withdrawals in hard currency then they may not have sufficiently huge number in terms of foreign reserve, they may not have that number they are look for,” he said.
“Although it is expected that there will be an increase in foreign reserves due to this policy, it will be marginal because more and more people will still believe that they can receive more when they take their money to the parallel market for exchange.”
Segun Ajayi-Kadir, Director-General, Manufacturers Association of Nigeria (MAN), told the News Agency of Nigeria that the scheme was set against the backdrop of the forex squeeze aggravated by the fall in oil prices and the COVID-19 pandemic since the first quarter of 2020.
Mr Ajayi-Kadir said the measure suggested that the CBN was taking a closer look at the nation’s foreign exchange supply by incentivizing it through diaspora dollar remittances to ramp up supply and help stabilize the forex situation of the country.
“On the face of it, the scheme should encourage Nigerians working abroad to remit more into Nigeria and thereby improve the forex inflow.
“However, we need to dimension the inflows which has historically been 70 per cent for family support and 30 per cent for other purposes, including real estate which carries the greater part.
“In order to yield more of the anticipated inflow for investment in productive activities, the CBN would have to work with the banks and other relevant government agencies to initiate portfolios and measures to point the remitters in that direction,” he said.
Mr Ajayi-Kadir also pointed out the need to clarify where domestic foreign exchange earners stood within the context of the scheme.
“For instance, could a manufacturer who exports his product and repatriates his dollar profit get his money in dollars and also benefit from the Dollar 4 Naira Scheme?
“This way, you can guarantee almost a 100 per cent re-investment in production and reap all the attendant benefits and even partly make-up for the looses incurred as a result of the chequered implementation of the Export Expansion Grant (EEG).
“The average manufacturer who is confronted with a lot of infrastructure and macroeconomic challenges is eminently qualified, if not more qualified, to benefit from such a scheme,” he said.
Also, Muda Yusuf, Director-General, Lagos Chamber of Commerce and Industry (LCCI) said the CBN deserved to be commended for this policy.
Mr Yusuf, lauding the move, said it would encourage forex inflows and ease the current liquidity challenges in the forex market.
He, however, urged the CBN to go further by allowing exporters unfettered access to their export proceeds, whether in foreign exchange or Naira.
“This will surely have a positive impact on inflows and ultimately on the exchange rate,” he told NAN.
“The current practice of imposing the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) rate on export proceeds should be discontinued in the spirit of the current move to incentivize forex inflows.
“Similarly, Foreign Direct Investments (FDI) and Foreign Portfolio Investments (FPI) should be allowed greater flexibility in conversion rates of their inflows.
“A combination of these supply side strategies would have a remarkable impact on foreign reserves, forex liquidity and the naira exchange rate,” he said.
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