The Lagos Chamber of Commerce and Industry, (LCCI) has hailed the adoption of the Nigerian Autonomous Foreign Exchange Rate (NAFEX) as the official exchange rate, stating that the move will also help the country to unlock external financing opportunities particularly from key multilateral institutions
The President of LCCI disclosed this during the quarterly press conference on the state of the nation.
According to her, the unification is expected to improve the country’s currency management framework given that the multiple exchange rate systems had been creating uncertainty issues and sources of arbitrage. The development is expected to bolster the confidence of foreign investors in the economy.
“The move will also help the country to unlock external financing opportunities particularly from key multilateral institutions such as the World Bank and the IMF, who had for long advocated for a unified and flexible exchange rate system.”
“However, we note the forex market is still faced with liquidity challenges. Many investors are lamenting about the difficulties in accessing foreign exchange for the importation of raw materials, equipment and critical inputs for production and processing. The situation is taking a huge toll on capacity utilization, recovery and sustainability of businesses in the production sector.”
She explained that the indefinite extension of the Naira for Dollar scheme by the Central Bank of Nigeria.
“We consider this as part of CBN’s efforts at encouraging foreign exchange inflows into the economy via remittance proceeds. The apex bank also licensed 10 new International Money Transfer Operators (IMTOs) to facilitate remittance flows into the economy.”
She further stressed that the chamber notes the decision of the Monetary Policy Committee of the Central Bank of Nigeria to retain (a) Monetary Policy Rate (MPR) at 11.5%; (b) Asymmetric corridor around the MPR at -700/+100 basis points; (c) Cash Reserve Ratio at 27.5% and (d) Liquidity Ratio at 30% during its May 2021 meeting.
“We note the committee was faced with a policy dilemma of trying to maintain a balance between stimulating growth and ensuring price stability. The economy is currently in stagflation, evidenced by high inflation, high unemployment level and fragile growth. Weighing the pros and cons of monetary accommodation and tightening, retaining policy parameters was the most appropriate decision in the light of prevailing macroeconomic conditions.”
“We acknowledge and endorse the recommendations presented by the MPC at its last meeting. Key among them include the need for the Federal and state governments to show more commitment to the insecurity challenge considering its multidimensional impact on the economy.
“The need for an effective synchronization of fiscal and monetary policies to improve the investment climate to attract sustainable foreign direct investments into the economy. This would also help to stabilize the exchange rate and boost output growth.”