Following the Bankers’ Committee meeting held in Abuja recently, there had been reports that the Central Bank of Nigeria (CBN) will stop selling foreign exchange (FOREX) for the purpose of paying school fees or medical bills abroad.
This has, however, been denied by the apex bank which has noted that it has no immediate plans to end FOREX sales for school fees and medical of tourism.
According to a statement issued by the director, Corporate Communications, Ibrahim Mu’azu, the apex bank had urged genuine users desiring to obtain FOREX for school fees and medical bills purposes to freely approach their banks with their requests and appropriate documentation.
The Bankers’ Committee of the CBN had at the last meeting noted that there had been a significant increase in the demand for FOREX for the payment of school fees and medical bills abroad. It said that the development was crowding out the demand for FOREX by the real sector, stating that if left unchecked, the trend could affect the banking sector’s objective of stimulating the real sector of the economy through the provision of FOREX to productive sectors. It, however, did not say that it would end FOREX sales for the purposes of school fees and medical bills payment as has been misconstrued by some.
The CBN director, Banking Supervision Department, Mrs Tokunbo Martins, said that while there are no plans to remove school fees and medical bills payment from the eligible FOREX list, there is need to ensure that the high demand does not crowd out the real sector from the FOREX market.
“The pressure on foreign exchange now from school fees abroad is significant. At what point do we begin to look inward? The pressure on medicals too is significant and I think as Nigerians, we also need to be patriots in terms of our sentiments. We need to think about what we need to sacrifice today for the long term benefit of the country and the economy,” she said.
Meanwhile the value of the naira appreciated last weekend as the demand for the FOREX by speculators weakened. A bureau de change operator who spoke with LEADERSHIP noted that the value of the naira could not maintain the momentum it was flowing with last week as its value during the week did not reflect the true value of the naira. Having started the week at N340 to the dollar, the demand has gone haywire, shedding almost 15 per cent of its value in the space of three days. As at Thursday, the dollar had sold between N387 to N391 across the country but rose in value to N371 by the close of business on Friday last week.
The Edo State Governor, Comrade Adams Oshiomhole, while speaking at The Cable Colloquium, organised by the online newspaper, noted that the crux of the issue borders on speculation and not that of demand and supply, pointing out that the devaluation, as being canvassed, would lead to a further economic crisis for workers. He also argued that devaluation, from statistics, would not guarantee increase in export activities as being canvassed.
“The evidence we have is that 98 per cent of our exports are in oil and gas, which are priced in dollars. So, no matter what your exchange rate is, the percentage will not change. On the other hand, when you devalue, will fewer people travel, again? No. What we are dealing with is not a supply issue; we are dealing with speculation issues. If you devalue, the main people that will be trapped are the workers. Will devaluation curb our appetite for imported goods as the IMF argued in the 1980s? The evidence from the CBN shows that policies in the Nigerian environment cannot curb our appetite for foreign goods.
“The last time the CBN devalued the currency in 2014 our exports actually declined and our imports increased by 2.9 per cent after devaluation. When human beings don’t labour to earn, they do not spend rationally,” he stated.
While devaluation may prompt portfolio investors to flood into the country, its end result will put more burden on the already burdened masses. Because Nigeria is an import-dependent country, a devaluation of the currency will lead to a rise in the prices of many consumer goods, a lower purchasing power, and the devaluation of wages. In the developed nations when currencies are devalued it is to encourage exports because the prices of local products serve as an incentive and a toast for foreign buyers. In the process they earn FOREX, increase production and create additional jobs. Unfortunately, that is not the position with Nigeria.
An import-dependent economy, Nigeria imports a majority of its consumer goods, and many manufacturing companies also have a portion of their raw materials that are imported while most machinery are imported. A devaluation of the naira which would have bettered the fortune of an exporting economy will cause a spike in the cost of production and the prices of goods and services, and ultimately a rising inflation in an import-dependent nation like Nigeria.
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