The Group Managing Director of UAC Plc, Larry Ettah, has advised the Bankers Committee to increase the allocation of foreign exchange to the country’s real economic sector, in order to accelerate the nation’s economic development.
Ettah was reacting to the committee’s avowed intention to suspend foreign exchange allocation for medical bills, school fees and other invisibles, which has been calculated to make up an estimated 15 per cent of total foreign exchange demands in the country.
He explained that the pressure on demand for forex became especially significant because the CBN had continued to fund “private elite choices” with high allocations to invisibles such as school fees, PTA, BTA and medicals to the detriment of the real sector like agriculture, industry and building and construction.
“Forex should ideally be targeted at the real sector that has significant local economic linkages, particularly with a view to reviving the nation’s dying productive sectors and the spin-off in terms of employment generation,” he said.
The UAC boss observed that recent statistics released by the CBN showed that Nigeria’s productive sub-sectors accounted for 93.67 percent of the country’s Gross Domestic Product (GDP) in 2000 and that this contribution steadily declined to 76.21 percent and 70.71 per cent in 2010 and 2013 respectively.
“Valid arguments exist as to how to address the trade and financial flow mismatch as seen in the current foreign exchange management regime,” Ettah said, stressing, however, that “flexibility is expected but it should not include currently peddled populist false remedy of wholesale devaluation without maintaining policies that seek to domesticate production.”
He described as unwholesome, a situation in which an estimated N155 billion was spent a year in the past to educate Nigerian children in Ghana at a time that about N122 billion was spent to fund all federal universities.
“The existing high forex allocations to invisibles is clearly an elite privilege that Nigeria cannot afford now or need do,” he said whilst maintaining that “the choice of sending our children/wards to institutions overseas and embarking on sometimes dubious pleasures of foreign travels for holidays are private decisions with its attendant cost that should not be subsidised by the commonwealth.”
Ettah noted that whilst the CBN’s new forex policy thrust would generate lively debates, these should be grounded more on the long term benefits for national economic revival, not the erosion of ‘entitlements’ of individuals and groups who, over the years, had benefited from the hitherto lopsided forex allocation policy.
He observed that whilst few Nigerians actually benefit from the highly discretionary forex allocations to school fees, BTA, PTA, medicals and other invisibles at official/CBN rate of N200 to $1, “it has become an avenue for egregious practices where opportunity meets discretion and corruption is manifesting in the banking community.”
He added that “the inconvenient truth is that demand for invisibles, by any estimate, should not be up to the currently reported 15 per cent of total forex demand. This has become the norm due to sharp practices and rent seeking racketeering of those who are profiting from our despair,” he said.