Neoliberal Unification of FX Rate: CBN Needs to Provide Clarity on 41+ Items Restrictions


The announcement by the Central Bank of Nigeria yesterday that it is collapsing all foreign exchange windows to just the Investors and Exporters rate has generated a lot of debate in the country and international scene.

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In its latest statement, global investment banking group Goldman Sachs pointed out that the CBN did not address the issues of FX restrictions to over 41 items.

It noted that the restrictions apply to current accounts (imports) or capital account transactions.

In its acknowledgement of the latest monetary policy step of the CBN on the foreign exchange market, Goldman Sachs believed unifying the official and parallel market exchange rates is likely to depend mainly on easing these restrictions.

Goldman Sachs further stated that this was critical as there is still an outstanding FX backlog to be cleared, which is estimated at around $12bn.

It also called for clarity on the policy preferences of the monetary authorities with respect to the FX regime.

The statement added, “Following the suspension of the former CBN Governor Godwin Emefiele, the new administration has not yet made an appointment of a new governor. Thus, it remains uncertain whether the CBN will repeg the currency at a new(weaker) level or might move in the direction of introducing some currency flexibility.”

The investment bank also stressed that introducing currency flexibility and/or easing restrictions on access to FX will come with higher interest rates.

It will be recalled that in June 2015, the Central Bank of Nigeria introduced foreign exchange restrictions for 41 items.

This was designed to reduce Nigeria’s import dependency and support efforts to attain domestic production and boost manufacturing/industrialisation.

Some economists and analysts believed it was too restrictive and that CBN was administratively managing the foreign exchange market.

The trilemma of any monetary policy includes the interest rate, inflation rate and foreign exchange rate.

Gbenga Samson
Gbenga Samson
Samson Gbenga Salau [Editorial Board Adviser] Gbenga Samuel Salau is a professional journalist with over 17 years experience in journalism, he is a graduate of Communication and Language Arts, University of Ibadan. On completion of his youth service, he joined The Guardian as a freelance journalist and was later absorbed as a staff. While in the University, he was a campus journalist reporting for the Independence Hall and Faculty of Arts Press Clubs. As a campus journalist, he won the following awards; Independence Hall Press Best News writer; University of Ibadan Union of Campus Journalists’ Best News Reporter/Writer; First Runner-up, Reuben Abati Award for Investigative Journalism; Association of Faculty of Arts Students’ Press Best Reporter; University of Ibadan Union of Campus Journalists’ Best Political Writer; Winner, Reuben Abati Award for Investigative Journalism, and University of Ibadan Union of Campus Journalists’ Best Interviewer. He served the Association of Communication and Language Arts Students, as the Public Relation Officer, the same year he was appointed the News Editor of the Association of Faculty of Arts Students Press. The following session, he was made the General Editor, and a member of the 13-man University of Ibadan Students’ Union Transition Committee. As a reporter in The Guardian, in 2014, he won the Promasidor Quill Award Best Report on Nutrition and DAME Business Reporting category. In the 2015 edition of the Promasidor Quill Award, he won the best Report on Nutrition and Brand Advocate Categories, while in 2016, he won the NMMA Print Journalist of the Year, first runner-up Golden Pen Reporter of the Year and SERAs CSR Awards. Gbenga Salau loves traveling, reading, and listening to songs with good lyrics no matter the genre.

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