While many Nigerians, including economic experts, have hailed the foreign exchange, forex, policy, of the federal government, the Lagos Chamber of Commerce, LCCI, believes it is counter productive. The group insists that the policy has negatively impacted non-oil exports and has led to sharp practices and corruption in the export documentation process.
Muda Yusuf, the director-general, LCCI, said that the chamber had received several complaints from exporters about the adverse effects of the current forex policy on the export business. “The policy hurts and demotivates exporters as it denies them the natural advantage of increased profitability, which a weak currency offers,” said Yusuf in a statement made public Friday.
He explained that the major advantage of a weak currency was the incentive it provides exporters in the sense that the currency depreciation would make exports cheaper, create business and improve profitability for exporters, but rather Yusuf said the forex policy had denied them that advantage by not allowing unfettered access to export proceeds.
“The banks are, by the current regulation, the custodians of the export proceeds, which they covert to local currency for exporters at the official rate. Given the free market premium of about 35 per cent, the policy represents a major disincentive to the export business. Yet, the export sector development is one of the major planks of the economic diversification programme of the present administration. This policy regime resulted in a decline in the official declaration of export proceeds. It has also led to sharp practices and corruption in export documentation processes,” said Yusuf.
Continuing, he said, “This does not augur well for the economy and is not consistent with the objectives of the Economic Recovery and Growth Plan. This is also a major shortcoming of the current forex policy of the Central Bank of Nigeria.”
Yusuf urged the Central Bank of Nigerian, CBN, and the Economic Management Team to urgently review the policy and allow exporters free access to their export proceeds. “The banks should not impose conversion rates on them. Indeed, many Asian economies deliberately devalue their currencies so as to stimulate their export sectors. All forms of restrictions to forex inflows should be removed so that the supply side of the forex market can be positively impacted and the current pressure on the forex market reduced,” said the LCCI boss.