With sole reliance on the Central Bank of Nigeria (CBN) as a source of foreign exchange supply to the economy, financial analysts have called on the system, private sector and Nigerians to create additional sources of supply through export of services and goods.
This, according to them, would further enable availability and disbursement of forex to segments in the need.
They described the recent strategy adopted by the Central Bank of Nigeria (CBN) involving frequent injection of foreign exchange into the market to boost the value of naira as commendable but risky to the economy.
Larry Ettah, President, Nigerian Employers Consultative Association (NECA), while speaking in Lagos said that in a proper economy, there should be multiple supply sources, which could be determined by demand and supply.
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“People get confused on how they play in the market. We are sustaining this because oil price is a bit high now. If oil price starts weakening, we will have a problem,” he said, adding that the current posture is not sustainable.
“We need to stimulate sources of forex supply, stimulate the economy for foreign direct investment, foreign portfolio and the stock market will begin to open up. Let’s begin to stimulate the economy to enable more people invest and create jobs,” stressed.
Equally, an analyst told Businessamlive that the organized private sector should see to providing products and services that can earn forex instead of looking towards importation and use of forex for production not only for local consumption but for exports as well.
“Our neighbouring countries need some financial advisory and other services that we can offer and earn foreign exchange from. Even individuals should start looking at what they can do to earn forex,” he said.
Reflecting on the current macroeconomic indicators, Ettah said it was good news that inflation figures moderated for a third consecutive month in April 2017, reducing slightly to 17.24 per cent.
He said the level of inflation remained high, however, especially in the context of a recession and rising unemployment, which confirms the continuation of the phenomenon of stagflation (the simultaneous existence of unemployment, reflecting “stagnant” economic conditions such as recession, and inflation).
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According to him, this absurdity is more apparent, given that in the preceding 2010-2014, inflation moderated while economic growth was strong. This trend suggests misalignment of policy tools in the monetary policy toolkit adopted by monetary authorities, Ettah said.
He observed that current monetary conditions suggested a tenuous impact of monetary policy tools in reducing inflation in Nigeria, given that inflation has mostly been driven by currency devaluation and food production and distribution.
Etta said: “The most important negative consequence of this policy misalignment has been the high interest rate regime prevailing in the economy despite the recessionary environment.
“It is accepted practice in economic management in most jurisdictions that the correct posture in a recession is a reflationary fiscal policy and monetary easing, including reducing interest rates.”
The CBN has so far pumped over $5 billion into the forex market since it unveiled its new forex policy actions.