Naira’s exchange rate despite being of huge interest to Nigerians is not the only indicator of the state of the country’s economy. Focus, instead, should be on what steps the country is taking to achieve sweeping economic reforms, fuel productivity, innovation, and exports, that can pave the way for Nigeria’s enduring economic vitality.
On Thursday, 12 October, the Central Bank of Nigeria (CBN) issued a memo unbanning the 43 items initially prohibited from receiving forex through the official market. In their statement removing the ban, the CBN said that these restrictions had compelled importers to resort to the parallel market, creating additional demand for foreign exchange. According to the apex bank, this demand has increased the difference between the official and black-market rates. The explanations offered by the central bank are astonishing, particularly when you consider that even companies seeking foreign exchange for items not restricted by the list of 43 prohibited items cannot get dollars through the official market.
The CBN hopes that, somehow, the main issue of the exchange rate, liquidity, will be solved by this move. The apex bank seems to focus on something other than the supply side of the issue but is concerned about the symptoms of the problem. One wonders why the CBN is bothered by the exchange rate at the parallel market if it can provide liquidity for those seeking dollars through the official market. Even in cases where there is round-tripping, with adequate supply, the difference between the official and black-market rates will reduce, and the incentive to sell to the latter will diminish...
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