Manufacturers under the aegis of the Manufacturers Association of Nigeria Export Group have faulted a recent decision by the Central Bank of Nigeria directing deposit money banks to stop the use of foreign currencies as collateral for naira loans within 90 days.
The Manufacturers also carpeted the Association of Bureaux de Change Operators of Nigeria for advising the CBN to exclude non-oil exporters from accessing foreign exchange at the official market.
In an exclusive chat, MANEG Chairman, Odiri Meggison Erewa, told The PUNCH that the recent policy direction of the apex bank would be fraught with disastrous consequences for the real sector of the economy.
MANEG’s reaction came after the Olayemi Cardoso-led CBN issued a new circular, expressing concerns over the use of foreign currencies as collateral for naira loans.
The circular made available on its website and titled “The use of foreign-currency-denominated collaterals for naira loans,” was referenced BSD/DIR/PUB/LAB/017/004.
Although this is not the first time the bank has prohibited the use of FCY, it said it had observed the use of foreign currency by bank customers as collateral for naira loans. Hence, the decision to prohibit its use.
The new directive means a borrower may no longer use dollar deposits in their domiciliary bank accounts as collateral to obtain naira loans.
As a follow-up to development, the Association of Bureaux de Change Operators of Nigeria lent its support to the recent directive of the CBN to stop the use of the non-oil export domiciliary accounts deposits for naira loans.
The President of ABCON, Aminu Gwadabe said in a statement that the stoppage would not only add to dollar liquidity in the market but also help in the accretion of our buffers.
”We are bewildered that some companies and manufacturers with huge billions of dollars balances in their non-oil export Dom account source their Fx needs in the official window and use same for naira loans.
“We, therefore, advise for the review of the guidelines on holding currencies on non-oil export accounts to a maximum of 48 hours, to borrow from the South African policy on the operations of non-oil exports Dom account proceeds.
Gwadabe went further to advise the CBN to exclude non-oil exporters from accessing forex at the official window. He argued that many exporters come to the official window to source forex despite having billions of dollars in their accounts.
“The CBN should also not make applicants of huge billions of dollars holding on their non-export oil proceeds Dom accounts eligible for fx request at both the NAFEM and Nafex window.
“In the same vein, we urge the CBN to upgrade its policies and circulars to legislation regarding the impending BDCs new reforms to give comfort and guarantees to would-be investors in the transformation of the BDC industry’s sub-sector.
“We also want to pledge our continuing support to the CBN’s proactive and effective policies to address our volatility headwinds,” Gwadabe said.
The ABCON chief said that, as a self-regulatory body, ABCON and its members have resolved to continue engaging all stakeholders and players in the retail end market to deepen, liberalise, democratised and centralise the retail end segments of the market for price discovery, market efficiency, transparency, accretion of buffers and healthy balance of payments.
“We express our profound gratitude to the management of the CBN for its reconsideration and reinstatement of our sub-sector as third leg of the market to counter hoarding, and speculation with faster results than expected.
“The BDCs though unfortunately perceived sometimes as crude but effective will always remain the potent transmission mechanism tool of achieving the Apex bank’s mandate of price stability and liquidity in the market.
“We therefore urge the CBN to continue to drive and expand its thought mechanism to maintain the feat so far achieved in more than 15 years; as we have not only achieved the convergence of both rates, but market calmness and confidence of the public and foreign investors
“We also call for the separation of the ownership and operational structure of FMDQ,” Gwadabe added.
Speaking with The PUNCH, the Chairman of the Manufacturers Association of Nigeria, Odiri Meggison-Erewa faulted ABCON’s argument.
According to her, excluding non-oil exporters from the official forex market would impact negatively on production costs which would in turn drive up the prices of products.
She added that the fallout from stopping non-oil exporters from accessing the official forex market would dampen investments in the manufacturing sector.
She said, “I think it is not a good idea. Considering the high cost of doing business in Nigeria, challenges with remaining competitiveness on the global market and strategic mid to long-term role exporters can play to support CBN governor plans to strengthen naira.
“There have to be deliberate interventions to support exporters in Nigeria. If we kick out exporters in Nigeria this will discourage any potential future investment in that sector.”
The MANEG Chairman also said the non-oil exporters would seek an audience with the CBN Governor, Olayemi Cardoso in order to emphasise the need to discourage the idea being peddled by ABCON.
She said, “This idea, if adopted as ill-advised would immediately go against promoting non-oil exports in Nigeria and in the process prevent diversification away from oil.
“We would be seeking the CBN governor to meet with non-oil exporters as stakeholder engagement is critical here. All hands need to be on deck to support Nigeria and exports are critical to Nigeria’s balance of trade for the mid to long-term.”
SOURCE: PUNCHNG
