By Emeka Anaeto, Economy Editor

Following multiple rules rolled out by the Central Bank of Nigeria (CBN) last week, financial experts have classified the monetary policy regime and environment as unstable, uncertain and therefore hostile to businesses. CBN had rolled out two circulars last week declaring some items ineligible for both its foreign exchange (forex) window and the alternative sources namely, the bureau de change (BDC) and export proceed windows, citing excessive pressure on foreign reserve and the need to stimulate local production of those items.

Godwin Emefiele

A top executive of a leading banking group in Nigeria told Vanguard on the heels of the last circular issued last week that the policy circular was one too many on just a single item in the monetary policy shelf. He suspected that the apex bank was actually in panic over the growing quantum of unmet forex demand which would eventually force another round of devaluation of the Naira.

Afrinvest Group, a leading investment house in Nigeria, in its reaction last weekend said ”we observe that some of the recent policies are characterized by seeming inconsistencies, conflicts, policy reversals” adding that ”more clarifications that have trailed forex guidelines have considerably weakened the credibility of the CBN”.

According to the investment house, the feedback effect can be seen in heightened uncertainty in the capital market and the economy. They said that real sector investors face increased uncertainties in projecting cash-flows and deciding on long-term capital budgeting and short-term working capital plans.

They further stated that ”the CBN’s recent decision to restrict some arbitrarily selected-items from obtaining forex at all segments of the forex market has further placed the CBN’s policy under scrutiny from domestic and international media. With no analysis or data on level of domestic self-sufficiency provided to justify the exclusion of the 41 items, there are no basis yet to project the CBN’s next move on forex policy. This continues to be responsible for lack of clear direction for the market”.

”The financial market (equities and fixed income)”, according to them, ”is in dare need of a clear cut policy direction and stability. A lot of foreign investors appear to have taken to their heels leaving only the bandwagon local investors, who also have no clue of the impact of future monetary policy on their investment position, in the scene”.

Speaking in the same direction some executives of Stanbic IBTC Bank Plc in a radio program in Lagos last week lamented that even with the series of supplementary and additional circulars on the same issue the total outlook of the forex policy still left much room for clearity as it failed to address the effective date for the policy. They also noted that it would create considerable confusion with respect to transactions already commenced just before the new policy.