By Babajide Komolafe
LAGOS— The Monetary Policy Committee, MPC, of the Central Bank of Nigeria, CBN, has disclosed that the Federal Government owes local contractors more than N1.7 trillion.

Meanwhile, some members of the committee have called for an adjustment to foreign exchange policy to attract dollar inflows and close the wide gap between the interbank and parallel market exchange rates.

These emerged from the statements by the 11 members of the MPC at the November meeting of the committee. The statements were released, yesterday, by the CBN ahead of the outcome of the MPC meeting holding today.

The statements, among others, noted the increased concerns over the severe impact of Federal Government’s debt to contractors on the banking industry and the economy, as well as the need to fine tune the foreign exchange policy to attract dollar inflows and eliminate the wide gap between the interbank and parallel market exchange rates.

On the challenge posed by government’s debt, a member of the committee and a Professor of Economics at the University of Maduguri, Professor Balami Hassan, said: “It should be noted that domestic debt to government contractors is running into more than N1.7 trillion, a threat to stimulating growth in the economy because it affects the financial system stability.

“This is so because the contractors owe banks, thereby contributing to the rising level of non-performing loans (NPLs), which is threatening the capital base of the Deposit Money Banks, DMBs.

“The various levels of government are encouraged to settle the domestic contractors who are also indebted to help reduce the rising level of non-performing loans,  which is stifling the activities of the banks in the disbursement of further credit to the economy. This is necessary because price stability is the core mandate of the CBN.”

Emphasising the need to adjust the foreign exchange policy introduced last year in her personal statement, Deputy Governor, Economic Policy, CBN, Dr. Sarah Alade,  said: “The recently adopted foreign exchange regime is having less than expected outcome requiring the fine tuning of the implementation framework. After a period of restriction in the foreign exchange market, a new market driven approach was adopted in June, 2016.

Also, Dr. Doyin Salami called for a paradigm shift in the foreign exchange policy, saying: “Multiple FX rates don’t help in any way. Having agreed to forex market liberalisation at the meeting in May, I doubt if any of us on the MPC foresaw the current position. A fragmented market with price discovery only in parallel market was hardly what was envisaged.”

On his part, Professor Uche  Chibuike called for urgent measures to address the gap between the interbank and parallel market exchange rates, saying: “The current levels of arbitrage that exist in the foreign exchange market in Nigeria, if unchecked, will end up sabotaging the integrity of our banks, regulators and entire economy.”