Tinubu’s forex unification and CBN I &E window failing the naira, by Adefolarin A. Olamilekan
Just three months into the implementation of the brand new monetary policy of President Bola Tinubu administration of ‘forex unification and the CBN ‘I &E Window,’ the fate of the naira regaining its value hangs in the balance.
This has led to a situation that the national currency consistently falls flat to devaluation pressures at official market, parallel and black market, suggesting that the policy of forex unification and I &E Window may not be working, as we are beginning to see.
Although, the initiative of having a platform called I&E Window of where player’s are referred to has ‘Willing Seller and Willing Buyer’ operating as the official Nigeria’s Forex Market, was welcoming.
However, the forex environment has been over taken by its own systemic and systematic contradictions, where player’s now abuse the platform through round tripping,insider abuse,weak corporate governance,weak regulatory and supervisory measures, economic saboteurs as well as political interest factors reasons why I&E Window and forex unification is failing the naira and depreciating.
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Arguably, for us this twin policies in one, is not saving the naira from further devaluation, that has now double the amount Buhari left official naira to dollar at N465 to N789 to $1 dollar, that it is now been bought or sold under the Tinubu forex unification and CBN I&E Window structure. While on the parallel market naira is exchange between N920 and N1000 for $1 dollar.
Instructively, every concerns Nigerian’s are hopeful, that President Tinubu and the current CBN Acting Governor Folashadun Shonubi, get the economy working with the monetary policy they considered best to address the naira free fall or the corruption within our forex market system. For us we believed they mean well with this policies and other economic directions the government is putting in place to secure the economy.
And still, the government of the day may have toyed with forex liberalization as best option it can afford. Sadly, the current reality require not just liberal monetary policy that has successfully created a platform for greedy seller and miserly buyer, lining their pockets, only if the government understood the implications of free market economy on fragile environment like ours where greed and self rule.
Interestingly, as a humble economic researcher and analysts, we welcome these policies cautiously because it is not going to help the naira gain it’s value as the government and the CBN anticipated for a robust national currency.
In retrospect, as a concerned Nigerian, particularly, with unbiased interest in our national economic and development project, my take on the forex unification and I&E Window was well thought out in a piece titled, “Sound Naira is Required for Forex Unification Success,” and l was quick to remind the authority of not doing what is germane, but they were so fast in deploying the policy.
Nevertheless, the question that rings a bell and one we expect every economist or political economist to ask is; do the government know that the forex unification or I&E Window cannot survive under a deficit economic structure? Has President Tinubu forgotten that our economy is import dependence, where every businessman and woman look for dollar to feed our consumption of foreign items? Does President Tinubu think forex unification can survive under a free market, where the goal of the players in such is to maximize profit at all cost? Is it not time for the CBN and President Tinubu to acknowledge the fact that the uncertainty around the four major sources of FX inflow into Nigeria, namely; proceeds from crude oil exports, non-oil exports, Diaspora remittances, and foreign direct/portfolio investments are dwindling, and in need of pragmatic policy direction?
Moreso that the question about adequate forex supply to demand required discipline and stringent measure and methodology, if truly we want to end corruption within the corridor of our FX market?
Even though, our number one source of FX revenue is crude oil, that is currently gaining momentum in high price, hedging close to $100per barrel of crude, however, we need not remind ourselves, that we are at the mercy of international market price fluctuations and if it drops below $70/barrel or any shock due to the uncertainty around it, the burden will be excess on our foreign reserves as well as on government cutting down its spending on projects that would have reduced infrastructure gaps and poverty.
Meanwhile, the answers to earlier questions raised stare us in the face. For us, the answer evidently, is in the vision of President Tinubu and the CBN redesigning the forex unification and I&E Window beyond the liberalization model, that is feeding the so called ‘Willing Buyers and Willing Sellers’ with surplus forex from crude oil export, non-oil export proceeds, Diaspora remittances, and foreign direct/portfolio investments. This creates opportunity for round tripping, speculation, over pricing of the dollar and devaluations of the naira.
In other words, while the CBN struggles all out by deflating our foreign reserve to meet I&E Window demands, an oppressive distortion is brought to bear on the naira exchange rate through back door resale of the dollars at the black market. This now puts to question, where does the black market players get the dollars in excess that some business people claim they get from them, since the CBN cannot supply to meet the huge demand request.?
The above throws up a lot of issues that demand critical analysis, especially as one is confronted with the dilemma of which tent to align with.
Fundamentally, we need a monetary policy that will salvage Nigerian economy from oppressive and retarded activities in our FX market.
Our modest suggestions to the way forward, first, is that President Tinubu must rethink forex unification that incorporates free market or liberalization as surest way to bring naira back to great value.
It is our prayer that the President considered other parameters that would help naira regains it’s value, by finding solution to our import dependency syndrome, poor infrastructural governance and economic policy somersaults. In this regard, President Tinubu must avoid the mistake of surrendering the forex market totally to liberalization apostles.
Secondly, the CBN as the monetary authorities must be steadfast in avoiding distortions in its monetary instruments it deployed.
Thirdly, to ensure monetary equilibrium equally requires eliminating or minimally reducing the burden of round tripping and double dealings in forex, which in most cases compound loss of confidence in the apex bank’s official forex platform.
Lastly, the apex bank with all sense of urgency must ensure the Deposit Money Bank (DMBs) proactively take advantage and opportunity available in the export/import facility window to fund the forex needs of import customers.
In conclusion, one of Nigeria’s finest economists and monetary experts, late Sir Henry Boyo, would always admonish the CBN “to create monetary frameworks and policies that strengthen the Naira, an act that will be in the interest of all Nigerians.”We re-emphasize it today again – President Tinubu, CBN, save the economy and redeem the Naira.
Adefolarin A. Olamilekan adefolarin77@gmail.com
Tel: 08107407870
