Is CBN’s Forex Restriction Best For Nigeria?

Odilim Enwegbara, an Abuja-based Financial Consultant, has canned opposition to the foreign exchange restriction policy of the Central Bank of Nigeria, saying the approach was the best way to build the country’s economy and curb inflation.

Mr. Enwegbara, the Chief Executive of Pan Africa Development Corporation, in an exclusive interview  with one of Nigeria’s leading newspapers on Monday, April 18, 2016 said Nigeria needed the Forex restriction policy as one of the ways to limit access to importers of finished goods and compel manufacturers abroad to relocate to Nigeria to produce locally.

In June 2015, the CBN imposed restrictions on importers of 41 goods and services in the country from accessing foreign currencies at the Nigerian foreign exchange markets, which drew huge criticisms from Nigerians, particularly investors who claimed various sectors of the economy were impacted negatively by scarcity of foreign exchange on their businesses.

“We (Nigerians) are importing most of the things we consume here, because the cost of production here is high,” Mr. Enwegbara said. “We need to adopt the policy of monetary easing to make liquidity available to small businesses. Increased production will reduce pressures on imports and foreign reserves as well as curb imported inflation.

Although Mr. Enwegbara criticized CBN’s high interest regime, which is driving the high cost of production and inflation, he said the bank’s FOREX restriction policy was the best for the country’s economy at the moment.

He commended the federal government’s decision to enlist Nigeria as the 32nd member of the China-led bilateral currency swap club, saying removing dollars in major bilateral trade between Nigeria and China would be a source of relief to the country’s fiscal and external accounts.

In 2013, he said, out of about N1.59 trillion budgeted for capital projects, only N900 billion was spent, while about N690 billion was diverted to service debts. Although about N591 billion was voted for the year, a total of N834 billion was actually spent.

In 2014, he said the vote for capital spending was N1.119 trillion, but only N587.61 billion was actually spent, while about N228.1billion was spent without appropriation above N712 billion budgeted for debt servicing for the year.

In 2015, while N417 billion was voted for capital spending, Mr. Enwegbara said only N194 billion was actually spent, while about N193 billion was spent on debt service above the N715 billion voted for that purpose.

“If the Okonjo-Iweala-led economic team had not pursued anti-infrastructure investment, anti-real sector growth, and anti-diversification, economic policies, the current negative impact of global oil price volatility on our economy, especially in our fiscal and external accounts, would have been minimal,” he noted.