Why CBN’s FOREX restriction is best for Nigeria, says Enwegbara

An Abuja-based Financial Consultant, Odilim Enwegbara, has dismissed opposition to the foreign exchange restriction policy of the Central Bank of Nigeria, saying the approach was the best way to build the country’s economy and curb inflation.

Mr. Enwegbara, the Chief Executive of Pan Africa Development Corporation, spoke in an exclusive interview with PREMIUM TIMES on Monday.

In June last 2015, the CBN imposed restrictions on importers of 41 goods and services in the country from accessing foreign currencies at the Nigerian foreign exchange markets after the Naira plunged to a record low in February in the wake of unprecedented drop in global oil prices.

The policy drew huge criticisms from Nigerians, particularly investors who claimed various sectors of the economy were impacted negatively by scarcity of foreign exchange on their businesses.

Apart from former CBN governor and current Emir of Kano, Lamido Sanusi, the Lagos Chamber of Commerce and Industry (LCCI) criticized the policy, claiming its members in the steel, furniture, pharmaceuticals and manufacturing sectors lost over N1.46 trillion in six months of the policy.

But Mr. Enwegbara said Nigeria needed the FOREX restriction policy as one of the ways to limit access to importers of finished goods and compel manufacturers abroad to relocate to Nigeria to produce locally.

“We (Nigerians) are importing most of the things we consume here, because cost of production here is high,” Mr. Enwegbara said. “We need to adopt the policy of monetary easing to make liquidity available to small businesses. Increased production will reduce pressures on imports and foreign reserves as well as curb imported inflation.

He said government should focus more on importing those critical inputs to manufacturing, in terms of plants and equipment, to help diversify the economy, pointing out that importation of finished goods into the country should be discouraged.

“Those exporting finished goods to Nigeria should be forced to relocate to Nigeria to produce those things locally. Over a period, the pressure on our FOREX would reduce and inflation would come down,” he said.

Although Mr. Enwegbara criticised CBN’s high interest regime, which is driving high cost of production and inflation, he said the bank’s FOREX restriction policy was the best for the country’s economy at the moment.

“Importers of finished goods and importers of critical inputs to jumpstart and grow our industrial base should not source FOREX at the same rates,” he said.

Given all the high costs associated with doing business in Nigeria, the financial management expert argued that removing FOREX restriction would benefit importers of finished goods than those interested in producing same locally.

He commended the federal government’s decision to enlist Nigeria as the 32nd member of the China-led bilateral currency swap club, saying removing dollars in major bilateral trade between Nigeria and China would be a source of relief to the country’s fiscal and external accounts.

He said the high cost of production in the economy, which was as a result of the high infrastructure deficit in the country, would not have happened if successive governments, particularly the immediate past administration, had utilized the capital allocations in the budgets for the purpose they were meant.

Mr. Enwegbara accused the administration of diverting capital budget allocations between 2013 and 2015 to recurrent expenditure and debt servicing without appropriate extra-budgetary appropriations by the National Assembly.

In 2013, he said, out of about N1.59 trillion budgeted for capital projects, only N900 billion was spent, while about N690 billion was diverted to service debts. Although about N591 billion was voted for the year, a total of N834 billion was actually spent.

In 2014, he said the vote for capital spending was N1.119 trillion, but only N587.61 billion was actually spent, while about N228.1billion was spent without appropriation above N712 billion budgeted for debt servicing for the year.

In 2015, while N417 billion was voted for capital spending, Mr. Enwegbara said only N194 billion was actually spent, while about N193 billion was spent on debt service above the N715 billion voted for that purpose.

“If the Okonjo-Iweala-led economic team had not pursued anti-infrastructure investment, anti-real sector growth, and anti-diversification economic policies, the current negative impact of global oil price volatility on our economy, especially on our fiscal and external accounts, would have been minimal,” he noted.