Investors in various sectors of the Nigerian economy are weighing the negative impact of the scarcity of foreign exchange on their businesses, with the Lagos Chamber of Commerce and Industry (LCCI) saying some of its members lost about N1.46 trillion in six months.
The LCCI Director-General, Muda Yusuf, attributed the loss to stalled business activities due to inadequate supply of foreign exchange as a result of Federal Government’s policy on foreign exchange restriction.
Mr. Yusuf was reviewing the state of the nation’s economy and the business environment in 2015 as well as perspectives for 2016 that the outgoing year was the most challenging for private sector operators.
He said LCCI’s third quarter 2015 business environment survey showed that the Central Bank of Nigeria’s FOREX restriction policy proved the costliest of all government policies in recent years.
While Nigeria Customs revenue contracted during the year, compared to the previous year, the LCCI said its study also showed that private operators in the steel, furniture, pharmaceuticals and manufacturing sectors lost about N1.46 trillion in stalled business activities in the last six months as a result of the policy.
The LCCI boss said if steps were not taken to check the negative impact of the policy, particularly with crude oil prices dropping to unprecedented levels, the economy would face a huge danger in the New Year.
Mr. Yusuf said the unfriendly business environment has continued to undermine investors’ capacity to maximise the country’s abundant business opportunities, with the stock market losing over 30 per cent of its market capitalisation.
“The percentage drop in NSE capitalisation, one of the worst in the world during the year, was attributed to the depressed international oil market; exchange rate crisis and fears from slowing Chinese economy, which consequently induced negative pressure on the equity market,” the LCCL boss explained.
“The year 2015 was challenging as the difficult business environment persisted, especially in relation to insecurity in parts of the country, infrastructural conditions, foreign exchange crisis, funding issues, consistency of policy and the quality of institutions as well as uncertainties and risks created by the political transition and the elections,” he added.
He criticised the CBN’s policies on the country’s economic and financial crisis, saying its handling of a series of adverse developments in the international oil market had continued to push the country into the difficult situation the economy is facing at the moment.
The CBN, he pointed out, adopted several unfriendly measures, namely the closure of Retail Dutch Auction System (RDAS) window, restriction of cash payment into domiciliary accounts and prohibition of 41 items from accessing the interbank foreign exchange market.
“CBN’s administrative allocation of foreign exchange sign-posted much deeper challenges for investors and the economy,” Mr. Yusuf said. “As at December 18, 2015, premium at the parallel market reached a record level of 35 per cent, against the official exchange rate, as the Naira crashed further to 270 to the dollar in the parallel market.
“In an attempt to arrest the trend, the CBN, blamed the activities of speculators in the parallel FOREX market, thus pushing for stricter restrictions,” he said.
To address the problem, he said the CBN was advised to adjust the exchange rate close to equilibrium rate to moderate demand and stimulate supply of foreign exchange as well as ease the restriction on FOREX inflows through autonomous sources to boost supply.
Other proposals include the review of the policy of exclusion of 41 items from accessing FOREX market and real sector development through economic diversification strategy.