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The desirable forex policy re-jig

PERHAPS the current regime at the Central Bank of Nigeria, CBN, may go down in history as that with the highest turnover of policies, rules, regulations and guidelines in the annals of foreign exchange management in Nigeria so far.

This, according to banking industry operators, stem from the fact that CBN has rolled out more than 20 of such decrees in 2015 alone, whereas on average they usually get less than five. In fact in December 2015 alone three policies were rolled out.

Apparently it appears the apex bank is permanently under unprecedented pressure over steep decline in foreign reserves as occasioned by wholesome and unwholesome utilisation of the scarce resources across all segments of economic activities in the country. It is now beginning to look like central banking is all about managing exchange rate.

Consequently the regime is the most criticised especially by international financial media and analysts just on this foreign exchange matter alone.

It is also noteworthy that for the first time in recent years even bank chiefs have come out openly to disagree with the apex bank on this same issue.

These underscores the extent of stakeholders’ agitation over what has been happening in that policy arena.

Our concern on this matter is that things usually get worse with each policy stipulation, underscoring the weaknesses of any knee-jerk, spur-of-the-moment policy strategy.

We are not about to recommend a silver bullet policy framework for the foreign exchange market given the fact that most of the factors that led to this crises were beyond the control of the policy executives.

But we believe that policies that run riots, sometimes contradictory and most times confusing should be avoided as such can only send panicky signals and undermine the good intents.

CBN can be more rigorous and strategic in stipulating and rolling out policies on foreign exchange. A piece meal approach cannot help.

Also we observe that most of the policies are targeting the symptoms of the sickness rather than the root course.

Though we are aware of other measures the CBN is putting in place to minimise import dependency and monolithic export economy we believe that the same medium-to-long term perspective adopted in these measure is required rather than short term approach for the foreign exchange market.

Good signs of strategy re-think appears to be in the horizon with President Mohammadu Buhari indicating in the 2016 budget of a possible reversal of some of the stringent forex rules but we still recommend holistic approach irrespective of mounting pressures.


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