‘No Need to Panic Over Forex Policy’ – Emefiele

The Governor, Central Bank of Nigeria, Mr. Godwin Emefiele, spoke with journalists in Abuja on issues affecting the economy and the foreign exchange policy, among others. IFEANYI ONUBA was there

The central bank has been focusing on some sectors through the provision of interventions fund; what is the bank doing in terms of assisting the power sector in view of the complaints of the operators about lack of foreign exchange to import equipment for the industry?

I dare say that those in the power sector also qualify for the 60 per cent that has been set aside for manufacturing if they are importing materials such as components of metres, components of transformers, or plants and other equipment; the power sector qualifies. But it is also possible that the constraints some of the small manufacturers are facing may be confronting the power sector companies too; we will try to appeal to the banks to also look in their direction.

Will the CBN float the naira as being widely canvassed by some financial experts?

The reserves are now $29bn and it’s exciting to see this happen. But is there a need to float the naira? It’s important to know that we do not run a float regime; we run a managed-float (forex system) and what that means is that from time to time, we will continue to intervene in the market to ensure that the exchange rate does not go beyond our own expectations and those interventions will come to moderate the rates as we deem necessary.

The CBN is expecting the naira to be stable following its series of policy actions. When will the naira be stable?

The fact that we began to see some accretion to reserves does not mean that we have to be reckless. We will continue the policy of ensuring that foreign exchange is made available to those who are importing raw materials, plant and equipment and to those importing in the agricultural sector; but not for those who want to engage in what we regard as less important sectors that will not support growth and development of the economy.

What are the measures that the central bank is taking to close the gap of about 60 per cent between the official and the parallel rate?

Naturally, what we would try to do from time to time is to make more foreign exchange available within the limit of available resources to those sectors that we consider priority sectors. And we will continue to do that hoping that as we increasingly do that, the urge for people to go to what I regard as illegal market will hopefully reduce. I want to assure people that we would increasingly allocate forex resources to those very important sectors of the economy.

There are insinuations that the various multiple windows open in the forex market are sustaining the gap between the official and parallel market rate, thus aiding corruption. How do you react to this?

I have read about some multiple exchange rates. I have heard about budget rate; I have heard about parallel and black market rates; I have heard about airline rate and pilgrims’ rate and the rest of them. But it’s unfortunate and unfair that some of those writing or discussing these issues are those who have direct access to the Central Bank of Nigeria.

What we would have expected is that they would talk to us but I know the objective that they are pursuing is best known to them. Budget rate is a rate that is forecast rate and it has always been there from history. It is a rate that is used just to determine the budget and as you know the budget is a forecast, which is tentative. And so I cannot understand why people are using budget rate as a basis to say that is an exchange rate in the market. The parallel and bureau de change market rates, as far as I’m concerned, are one rate and I don’t understand the duplicity about the rate.

We seized the opportunity when the issue of the pilgrims rate came up last year to explain what happened and I keep saying that you must put yourself in the position of a businessman where you have struck a deal that this is the rate at which you will do your deal and because the conditions are against you, you now go back and begin to change the conditions. That is an unfair business practice. What happened was that sometime around March last year, the pilgrims commission, both Christian and Muslims, approached the CBN and at that time, the rate was N197 and that was the market rate at that time. Those who were going on pilgrimage started to make payment at the rate of N197 to the dollar. They made their full payment in advance of the pilgrimage. They wanted to embark on the pilgrimage sometime in July and then somebody said because market had moved; they should pay N300 or whatever it was. That would have been seen to be an unfair business practice on the part of central bank. It is just like if the rate had gone down; would we have also gone to them in the same direction? So, it is important for people not to play to the gallery. Their motive is best known to them.

The Vice President recently spoke in Davos where he said that the government was in talks with the entail bank to make changes in the forex policy as soon as possible. What will this entail? Will the policy on forex change anytime soon?

The forex policy that we are operating is flexible forex market, which has been in operation since June. And that document remains a sound document. But of course, there may be few issues and fine-tuning has to be made in terms of the implementation strategies; we will look at it from time to time.

But I will like to say there is nothing wrong with that document and there is nothing wrong with what the central bank is doing at this time to stabilise the exchange rate and see to it that the currency stabilises at a rate that we consider to be in line with any model that anybody wants to use to determine the price or value of our currency.

That is what we are doing and we will continue to stand by it. We will continue to assure those who are doing their business that as you require forex, we will support you and there is no need for anyone to panic.

The textile industry is in serious need of support considering its potential to create jobs; what is the CBN doing to complement the efforts of the government in this sector?

About N50bn has been set aside to see to the revamping of some of the textile industries. We have started to disburse the money but we have not quite disbursed everything. I know that in the 1980s and even up to the early 1990s, the textile industry used to be the second largest employer of labour in Nigeria after the public sector. We will continue to give our support because we want to see the textile industry grow. In today’s world where we are all confronted with the issues of bilateralism and trade practice, it is important that we start to look more at growing some of those sectors that used to create jobs for this country so that we will begin to see more of our young graduates going to factories to work as graduates rather than being on the streets as unemployed persons.

There are complaints that local manufacturers are not getting the 60 per cent allocation on forex compared to the large ones. What is the CBN doing about this?

We decided to allocate 60 per cent of forex to manufacturers and we did that for a purpose because we felt there is a need to support manufacturing sector. We felt there is a need to ensure that forex is made available to those that will provide jobs and get the manufacturing and industrial output to continue to look positive. And I’m happy that recent data released by the National Bureau of Statistics has started to show that the manufacturing index is looking upwards. On the central bank’s website, you will find the list of the banks; how much foreign exchange they sourced and how the foreign exchange has been deployed in line with the 60/40 ratio that has been prescribed for the banks. But from the data that we have so far, they are complying with the 60/40 ratio.

But I can understand why some of the Small and Medium Enterprises may be having a few challenges with their banks. This is because of the need to have credit lines to fund their accounts. We will try from this side to continue to appeal to the banks to show mercy to the smaller institutions so that they can also survive. But in terms of compliance with the 60/40 ratio that has been prescribed for the Deposit Money Banks, I am happy to say they are complying with it.