Consequent upon pressures and the open admonition by Senate President Bukola Saraki, and made more intense by the Managing Director of the International Monetary Fund, IMF, Ms Christine Lagarde, the Central Bank of Nigeria, CBN, may relax its policy on forex this week.
Sunday Vanguard learnt that apart from the call made in the open by the Senate President during last week’s audience with the IMF boss on the CBN, it has also been revealed that Lagarde pointed out, in unequivocal terms, the dangers of the continued forex policy instituted by the apex bank in the last eight months.
During the closed door sessions between the CBN governor, Godwin Emefiele, and Senate President Saraki on the one hand, and another with Ms Lagarde, there appeared to be a drift towards a consensual position on the restrictive forex policy.
Although Emefiele, according to a source at the private sessions, did not give away much regarding the apex bank’s possibility of a policy review, Sunday Vanguard was made to believe at the weekend that in the light of the expected visit from IMF economists this week, the policy may be relaxed.
The foreign exchange market witnessed introduction of several foreign exchange restrictions in 2015. The first notable restriction was the closure of official foreign exchange market (Retail Dutch Auction) on February 18, 2015 which translated to further devaluation of the naira to N197 per dollar from N165 per dollar.
The second notable restriction was the Exclusion of 41items from the official foreign exchange market.
Then, in August, the CBN banned acceptance of foreign currency deposit into domiciliary accounts.
In addition to the above, there was the reduction in the limit on usage of naira debit cards abroad. From $150,000 per annum the limit was pegged at $50,000 per annum per naira debit card. The daily cash withdrawal limit was pegged at $300 abroad.
During the year, the CBN banned banks from selling foreign exchange to the Bureau De Change (BDCs) while it revised the operating guidelines of BDCs, and in the process, banned any form of relationship of street hawkers of foreign currency (black market), and branch operations.
These restrictions coupled with dwindling foreign currency inflow due to continued decline in crude oil prices, as well as continued expectation of further devaluation of the naira, led to a consequential depreciation of the naira in the parallel market. The parallel market exchange rate of the naira rose from N179/N185 at the beginning of 2015, to close the year at N280 to a dollar.
And indeed, as a team of economists from the International Monetary Fund, IMF, are set to arrive Nigeria this week, there are indications that the executive and the legislative arms of government may have begun a process of horse trading with a view to making the 2016 Appropriation Bill, more implementable.
A finance ministry source told Sunday Vanguard that the discussions with the managing director of IMF, Mrs Christine Lagarde, who visited both arms of government last week has necessitated major amendments to the Bill, a development which has posed a challenge of how the Bill could be legally withdrawn from the two chambers of the legislature.
But the finance ministry source said the government is not planning to withdraw the Bill yet pending further discussions and understanding with the National Assembly.
Lagarde, while responding to questions on the 2016 budget had told reporters last week that ‘‘a team of economists is going to come here (Nigeria) next week to review and audit (the Bill) and have a good discussion with the government authorities to really assess whether the financing is in place, whether the debt is sustainable, whether the borrowing costs are sensible and what strategy must be put in place in order to address challenges going forward”.
The IMF boss held meetings with the Central Bank of Nigeria, the Finance Minister, Mrs. Kemi Adeosun, National Planning Minister, Udo Udoma, other members of the Executive Council of the Federation, EXCOF, the leadership of the National Assembly and chief executives of banks. She also had closed door sessions with both the President, Mohammadu Buhari, and the Vice President, Yemi Osinbajo.
This week the team of IMF economists are expected to meet with all these government officials and many more including the leaders of the private sector.
Sunday Vanguard learnt that areas of discussion for necessary policy actions and changes in the 2016 budget include revenue generation, tax system, fuel pricing, exchange rate policy, reduction in recurrent expenditure especially as it relates to cost of governance, allocations to infrastructure, health, housing and education sectors.
Other areas of possible change in the content of the Appropriation Bill, Sunday Vanguard learnt, will also include but will not be limited to borrowing to fund the budget where the federal government had already stated it would borrow about N2.1 trillion to fund the budget deficit.
Also the team would discuss ways of improving efficiency of the country’s public service, creation of tools to manage the impact of declining oil revenues and measures to reduce leakages.
In addition, the team would canvas measures to address foreign capital inflows, wealth creation in the power and transport sectors, best options for managing near-term vulnerabilities to international economic financial shocks, as well as strategies for improved policies and building stronger institutions.
They will also discuss framework for achieving inclusive and sustainable growth, poverty reduction and good governance at the lower tiers of government, the states and local governments.
Speaking to Sunday Vanguard over the weekend against the backdrop of concerns expressed by some observers on the effect of IMF intervention in Nigeria’s economic and fiscal policies, Nigeria’s leading economists, Professor Pat Utomi, said it was wrong to make a big deal out of IMF visits. According to him ‘’these are routine visits’’.
He stated, ‘’as members of the IMF it should be routine to have consultations. We must not lose sight of the fact that we live in a globalised world and that bad economic management in one country can result in export of troubles to other economies. Such troubles that are exportable – like inflation, the contagion of selling poisoned baskets of securities like the sub-prime crises that triggered the 2008 crises or current account deficits in Malaysia and elsewhere in Asia that started the tsunami of the Asian financial crises – and require some supranational financial institutions. As World War11 wound down the allied powers agreed in Bretton Woods that the IMF should be such.
‘’But countries have the obligation to model their economies and manage them well. Where the unexpected happens the IMF was put there to help out. We all contribute to and can have recourse to Special Drawing Rights, SDR, of the IMF in temporary trouble times but no one is compelled to go there. Economists from all ends of ideological spectrum, the truth remains that the IMF get bashed when they come in after the leaders have failed to do the right things from evidence available to them, including reports from IMF consultations.
Source: Vanguard