The Central Bank of Nigeria’s (CBN) ban on sale of dollars to importers of telecom equipment, power generators and finished products at its foreign exchange auction is a panic policy which may worsen rather than alleviate the problems it was proposed to solve, analysts said at the weekend.
According to them, the importers would still source dollars, possibly from the black market to fund their imports despite the restrictions. This could mount pressure on dollar demand and hike prices in an import Analystsdependent nation, then putting the consumers at the receiving end, they said.
The CBN banned the sale of dollars at its Retail Dutch Auction System (RDAS) to importers of electronics, finished products, information technology, generators, telecommunications equipment, invisible transactions, instead shifting demand to the interbank market.
The decision was to maintain the existing stability in the foreign exchange market and to strengthen ailing naira and conserve foreign reserves which closed around $38 billion at the weekend.
With the continued fall on oil prices practically out of the country’s control, what is needed now is for government to quickly fix those challenges like power that exacerbate the problem for instance, increasing dollar demand for generator imports, Tunji Awonusi, an Abuja financial analyst suggested.
“The CBN is in a panic mode and there is very little that it is going to do because the truth is that the importers are still going to get those funds somewhere, somehow to deliver to their customers – we are talking about multi-billion dollar industry- the generators and telecommunications.
“So basically, they are going to look for the dollars in the black market and then hit it up because a lot of people instead of selling to the banks will now opt to sell through the back door,” Awonusi told BusinessDay at the weekend.
“And if these people go to the black market, automatically, they are going to add the margin between CBN rates and the black market on the items they are bringing in like the generator which unfortunately has become a necessity across the country today. So this is a cycle that is going to continue to make us to suffer,” he added.
The naira has come under pressure in the past few months from falling global oil prices as the CBN raises its intervention with dollar sales in the foreign exchange market to support the pressured local currency.
There are also the challenges of supply and demand shocks coming respectively from oil theft and America’s cutting off supplies from Nigeria.
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Analysts are already thinking that recent pressures could make sense for the next Monetary Policy Committee meeting to adjust the naira exchange band from $155+/-3 % in order to conserve the reserves.
“We believe the CBN’s action of transferring funding of the above stated import items to the inter-bank market, which technically devalued the naira will trigger further depreciation of the local currency in the inter-bank, BDC
