Posted by By SEUN ADESIDA on
Central Bank of Nigeria (CBN) Monday liberalised the current Foreign Exchange Policy in use in the country by removing various sealings and restrictions hitherto attached to transactions.
Central Bank of Nigeria (CBN) Monday liberalised the current Foreign Exchange Policy in use in the country by removing various sealings and restrictions hitherto attached to transactions.
CBN governor, Prof. Charles Soludo who announced the policies at a press briefing in Lagos said that the new approach is aimed at bringing down the exchange rate of the Naira against other international currencies.
Said he,'we discovered that the two markets (the parallel and the autonomous), cannot meet the supply needs of the economy. The two markets cannot absorb more than $10- $15 million a week. Now the CBN is ready to supply more than what these two markets need on a weekly basis and by doing this the rates are going to come crashing."
To make this a reality, Soludo said the CBN will now allow banks to import their foreign currency directly, unlike before when they were not permitted to do so.
On the demand side, the apex bank is eliminating several of the restrictions that make it attractive for people to go to the parallel market, now one can go into any of the banks and obtain foreign exchange.
Other measures, which the CBN is utilizing to crash the exchange rates, include the approval of a 100 per cent increase in the amount of Basic Travel Allowance (BTA) a traveller is expected to hold to $5,000 per quarter per person. Before, it used to be $2,500. PTA is now $4,000 per person per quarter. Henceforth annual BTA per person will now be $20,000, while PTA is $16,000.
Travellers to ECOWAS sub-region will now have BTA and PTA issued in ECOWAS Travellers' Cheques, in addition to other currencies like the pound sterling, dollar or the naira, unlike before when restrictive requirements made them to go looking for it in the streets.
Importers and exporters can now heave a sigh of relief as Foreign Trade Finance Facility requirements has also been liberalised.
CBNs approval for foreign guarantees, currency deposits as collateral for naira loans has been waived. However, banks are required to do due diligence on such transactions.
On securities payable in foreign currency; operators can now use funds in the inter-bank forex market, subject to repatriation of earnings which should be credited to domiciliary account.
An earlier requirement which stipulates that funds deposited in export domiciliary accounts shall be sold to the dealing bank or any other bank or be utilized only for eligible transactions subject to prescribed documentation is now liberalized. Accordingly, exporters may now sell their export proceeds to any bank, withdraw for own use, issue instructions to the bank to transfer to any beneficiary and utilize the proceeds for transactions subject to prescribed documentation requirements.
Equally, transport mode for exports can now be executed on Free-on-Board (FOB) or Cost and Freight (CFR) basis, depending on the choice between the Nigerian exporter and the overseas importer.
Soludo said the inflow of foreign exchange from the autonomous market is more than what the CBN can supply. 'The foreign exchange that we even have to sell have little or no demand for foreign exchange today. Now we are prepared to supply increased volume of foreign exchange to all the formal and informal market. Even if we supply what is required in the two markets, we will not sell up to 40 per cent of what we have purchased to sell in terms of foreign exchnage."
He warned those still hoarding dollars, Euro or Pound Sterling that they are going to lose dearly, because as the exchange rate continues to appreciate they will continue to lose money. He said, 'if they buy it at N120 or N130 today, you may continue to keep it until it gets to N110. Then you lose terribly, this is a bad time for anybody to keep foreign exchange because we have enough supply for the market and if they keep doing so they will continue to lose money and we have enough to sustain it for the next 5 years."
Speaking on the CBN's objective, he said ' Our objective is to ensure that the Bureau De Change (BDC) exchange rate and the official rate converge over time and that is where we are going," adding that the apex bank is now prepared to address the two sides of the impediments affecting the foreign exchange market.
On importation, Soludo said, 'we expect that the import ban and excessive documentation that trailed importation business, which actually drives people from the formal market to the informal market will be addressed over time."
In the interim he said what the CBN has done is to implement a set of programmes that it has started to implement,so as to ensure increase in supply of foreign exchange to all the forex markets. In the next two days or three, he said, ' I will not be surprised to see the rates crashing, because, if we push $50million into the markets it will definitely push the rate down."
Daily Sun spoke with the President of the Bureau De Change Association, Alhaji Farouk Sulaimon, who said, ' we can now start to enjoy reasonable rate, because now we the operators of BDCs can walk into any bank and negotiate a better rate and if any bank gives us an unsatisfactory rate you go to another one."