FG bars textiles importers from forex window

As Godwin Emefiele, the confirmed second –term Governor of the Central Bank of Nigeria (CBN), told Nigerians to tighten their belts for harder times ahead, some financial experts have started peering into the crystal ball on what his monetary policies on inflation and interest rates would be.
To start with, the Chairman of the Chartered Institute of Bankers of Nigeria (CIBN), Abuja Chapter, Professor Uche Uwaleke, told him that there should be intensification and effective monitoring of the apex bank’s intervention programmes, particularly, the Anchor Borrower programme.
“Emefiele should also focus on ensuring increased access to credit by SMEs and generally fostering a low interest rate environment with the support of fiscal authorities concerns over portfolio flows should remain high on the CBN’s priority list,” he said.
For Lukman Otunuga, the London-based analyst with FXTM, more time will be needed to carefully assess what Emefiele’s re-appointment means for inflation, interest rates and economic growth.
He stated: “No action may be the best course of action for the monetary authority in the near-term as the Nigerian economy attempts to stabilize. While the slowdown witnessed during the first quarter of 2019 may pressure the Central bank of Nigeria (CBN) to cut rates further, signs of rising inflationary pressures are poised to obstruct the MPC’s pro-growth direction.
“In an effort to prevent any unexpected shocks to the Nigerian economy at a time where global conditions remain unfavourable and uncertain, the CBN is likely to maintain the status quo by keeping rates unchanged. Considering how economic growth during the fourth quarter was higher, the slowdown in Q1 GDP may prove to be temporary before the nation builds momentum in 2019. Signs of easing inflationary pressures, positive domestic data from key sectors, improving global conditions and a greater push in diversification could encourage the central bank to act in Q4. Until then, we may see the CBN adopt a wait-and-see approach, like many other major central banks across the globe.”
Emefiele has said the bank would continue its tight monetary stance in the near term and sees inflation of 11.3 percent in February rising to 12 percent this year before moderating.
The latest report from the National Bureau of Statistics (NBS) shows a rebound in inflation in April to 11.37 per cent from 11.35 per cent in March. On this, Otunuga said it was coincidental how the inflation rate accelerated in April, only a month after the central bank unexpectedly reduced interest rates for the first time in more than three years.
“With the impacts of the rate cut in March having a delayed effect and unlikely to be reflected any time soon, should inflation return with a vengeance in the coming months, businesses and consumers may feel the heat – ultimately impacting economic growth. All in all, it remains too early to come to any meaningful conclusion over whether inflation is set to rise, given how this has been the first increase in three months.”
For analysts at Lagos-based CSL Stockbrokers, Emefiele’s reappointment means that the Naira would not be devalued, but stated that the market currently needs more than news of the CBN governor to show a positive reaction.
“Despite a positive outlook for 2019, the price of oil, a major source of foreign exchange to the country, remains extremely volatile. Oil trading at lower levels poses a threat to economic stability as it could stall the accretion of reserves and threaten exchange rate stability. Therefore, portfolio flows are still a go-to buffer in order to maintain a stable exchange rate and the MPR must remain attractive enough to sustain them.
“For the equities market, we expect a neutral reaction. Though Emefiele’s re-election possibly points to no devaluation, which is positive news for the market, we believe the market currently needs more than news of the CBN governor to show a positive reaction,” they said.
For a senior economist at South Africa’s NKC African Economics, Cobus de Hart, “Governor Emefiele’s nomination means that we will likely not see a major change in the conduct of monetary policy or a much-needed shift in Nigeria’s diversification strategy.”
When he appeared before the Senate Committee on Banking, Insurance and other Financial Institutions last week for his reappointment screening, Emefiele said if given second term , CBN under him would push very hard to ensure that those who seek to undermine the policies of Nigeria without respecting the laws of the land would be brought to book under any circumstances.
On multiple exchange rate he said:
“A couple of people have raised issues that we have multiple exchange rates. And we have said we do not have multiple exchange rates. When you talk of multiple exchange rates, you talk about divergence in exchange rate. Substantially today, our rates have converged around N360 to $1. Because the investors and exporters will know which is the dominant market for procurement of foreign exchange today, it hovers around that rate.
“But what you will find is multiple windows and we don’t have any apologies for it.
“When you talk about multiple windows, the Central Bank has a responsibility to provide foreign exchange to everybody. What we saw that resulted in us creating multiple windows, we want to make sure that those who seek to travel who will normally go to our banks to ask for foreign exchange and the banks will turn them away, and these people will seek to go to black market to buy foreign exchange, we said no. We will allocate specific sums of money to you to allocate to people who want to travel.
“We will allocate specific sums of money to you to allocate to those who are into the small and medium enterprise business. And we will allocate funds to you for you to give to those who are in your corporate sectors.
“So, you will find multiple windows, because the rates at which foreign exchange is traded through all these windows are substantially the same.
“So, there is no multiple exchange rates but I will admit there is multiple windows and it is for a good reason.”

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