"Naira to appreciate on black market \u2013 Analysts"

" Naira to appreciate on black market \u2013 Analysts \r\nThe Central Bank of Nigeria (CBN) has given the green light to importers of 43 items prohibited from accessing foreign exchange in the official market eight years ago. This move will help the naira to be come stronger on the parallel market, analysts have said.\r\n\r\nThis was disclosed in a statement signed by Isa AbdulMumin, the CBN\u2019s director of corporate communications.\r\n\r\nThe CBN had on July 1, 2015 restricted the availability of foreign exchange to the importation of 41 items which could be competitively produced within the economy.\r\n\r\nSome of the items include rice, cement, margarine, palm kernel\/palm oil products\/vegetables oils, meat and processed meat products, vegetables and processed vegetable products, poultry \u2013 chicken, eggs, turkey, Private airplanes\/jets, Indian incense, tinned fish in sauce (geisha)\/sardines, cold-rolled steel sheets, galvanised steel sheets, and roofing sheets.\r\n\r\n\u201cImporters of all the 43 items previously restricted by the 2015 circular referenced TED\/FEM\/FPC\/GEN\/01\/010 and its addendums are now allowed to purchase foreign exchange in the Nigerian foreign exchange market,\u201d the statement said.\r\n\r\n\u201cThis is a welcome move by the CBN. It\u2019s another market-friendly step towards unified exchange rates. It should reduce pressure on the naira in the parallel market \u2013 where importers of those 43 items had to access US dollars instead. It might even be anti-inflationary, as those 43 products included rice, meat and vegetables \u2013 which had to be sourced at N1,000,\u201d said Charlie Robertson, head of macro strategy at FIM Partners UK Ltd.\r\n\r\nHe said there is still more to do. \u201cTo reduce FX shortages in the official FX market, the CBN might also need to signal that commercial banks can offer a weaker naira rate for US$, to help increase the supply of dollars from current holders of US dollars (Nigerians and foreign). Higher interest rates would help in that regard.\u201d\r\n\r\nAyodeji Ebo, managing director\/chief business officer at Optimus by Afrinvest, said the move was long overdue and that the bold step was commendable, and would result in naira appreciation in the parallel market.\r\n\r\n\u201cWe expect improved activity at the Foreign exchange market formerly known as the I & E window. However if CBN does not match the demand with sufficient supply, we will see further depreciation in that market. However, we expect to see appreciation in the black market due to reduced demand,\u201d he said.\r\n \r\n The CBN said it is committed to accelerating efforts to clear the FX backlog with existing participants and will continue dialogue with stakeholders to address the issue. \r\n \r\nAccording to the statement, the CBN has set as one of its goals the attainment of a single FX market. \u201cConsultation is ongoing with market participants to achieve this goal,\u201d it said.\r\n\r\nThe CBN said the prevailing FX rates should be referenced from platforms such as the CBN website, FMDQ, and other recognised or appointed trading systems to promote price discovery, transparency, and credibility in the FX rates.\r\n\r\n\u201cAs part of its responsibility to ensure price stability, the CBN will boost liquidity in the Nigerian foreign exchange market by interventions from time to time. As market liquidity improves, these CBN interventions will gradually decrease,\u201d it said.\r\n\r\n\u201cRegarding the readmission of the 43 items to the forex market, its immediate impact will be to reduce the premium between the official and the parallel market. But it will have negative implications for import substitution and local manufacturing efforts,\u201d Uwaleke, professor of Capital Market at the Nasarawa State University Keffi, said.\r\n\r\nHe said the decision to readmit 43 items is ill-timed in view of the current forex shortage, and that the official exchange rate will further rise to meet the parallel market rate.\r\n\r\n\u201cWe welcome the decision of the CBN to discontinue the forex exclusion policy on the 43 items. It is a move in the right direction. It is part of the policy normalisation process,\u201d Muda Yusuf, CEO of Centre for the Promotion of Private Enterprise, said.\r\n\r\nHe said the exclusion of the 43 items was one of the several drivers of distortions in the forex market, adding that the exclusion of the items also contributed to the persistent divergence in rates between the official window and the parallel market.\r\n\r\nAccording to him, the exclusion was also in conflict with extant trade policy as the items were not under import prohibition in the first place. It was an example of lack of policy coordination under the previous administration.\r\n\r\nYusuf said: \u201cThe new directive will also improve transparency and disclosures in foreign exchange transactions. Meanwhile, the CBN should avoid market suppression tendencies, especially outside the I&E window.\r\n\r\n\u201cThe fiscal authorities should continually monitor the economic landscape to shape the character of fiscal policy measures to regulate imports in line with comparative advantage principles. We need to worry about the risk of import surge. There is also a need to upscale the use of fiscal policy measures to boost domestic production and productivity.\u201d\r\n "

"Naira to appreciate on black market \u2013 Analysts"

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