THE Federal Government has, for a long time, demonstrated the scriptural allegory of “the right hand not knowing what the left hand is doing”. Perhaps, it has to do with its ponderous, oversizeded nature, which has led many commentators to recommend a serious downsizing or devolution of powers to enable governance run smoothly and produce desirable results.
This trend has intensified under the President Muhammadu Buhari regime. Sometimes two sections of the same agency work at cross-purposes, leaving those dealing directly with them perplexed. The Central Bank of Nigeria (CBN) is one agency of government which has lately got those whose activities it supervises bewildered.
The CBN announced the suspension of eight banks from the foreign exchange market, only for the ban to be lifted a week later after it finally saw reason and applied a solution that was available all along.
The latest episode which could impede recovery from recession occurred in October this year. Most Nigerians who are not involved in the export business might not be aware of the sudden policy changes in the same month which will discourage exporters from repatriating their foreign exchange earnings to Nigeria and help drive down the exchange rate.
The CBN announced that exporters are to have unfettered access to their foreign exchange earnings – including selling to any party at any agreed price. That was good news to the exporters. Suddenly, the same CBN turned around to stipulate that they must sell their foreign exchange at N305/$1. Yet, in order to produce and export, these business entities procure the dollar at more than N400/$1.
How on earth the CBN expects an exporter to buy dollars at N420/$1 and sell earnings at N305/$1 is a mystery which only officials of the bank can unravel. Obviously, it makes no sense for two reasons.
First, it amounts to asking the exporters to subsidise the Nigerian economy by providing dollars at a cheaper rate than they earned them. Second, the measure is discriminatory. It penalises the honest exporter, while leaving those engaged in illegal and invisible trade to obtain full value for their own foreign exchange earnings.
Most stakeholders in the economy, especially private sector players, have cried themselves hoarse over the general lack of economic direction by the Buhari administration. The CBN appears to be the only active policy centre working hard at its traditional monetary policy functions and sometimes making useful interventions in some key sectors.
It cannot afford to keep flip-flopping, especially on the crucial foreign exchange matters. It should think through issues before going public. We urge the bank to rescind its order to artificially peg the selling price of foreign exchange to enable exporters benefit from the fruits of their labour.
The market mechanism always does a better job at price fixing.