LAGOS, (CAJ News) – A FINANCIAL firm has expressed mixed feelings over latest directives by the Central Bank of Nigeria (CBN) to accelerate the development of local industry.
CBN has issued a directive to authorised dealers requiring that a minimum of 60 percent of their total foreign exchange purchases be channelled explicitly to end users for the purpose of raw materials, plant and machinery importation.
Rand Merchant Bank (RMB) argued in theory, the ruling could expedite growth in the manufacturing sector provided there was sufficient foreign exchange liquidity.
However, the bank said CBN’s attempt was likely to aggravate trading conditions as interbank market participants struggle to contend with a limited pool of United States Dollars.
“The upshot is that other sectors will be forced to compete for fewer US Dollars, possibly redirecting demand outside official channels and widening the gap between the official and parallel rate,” RMB stated.
“One would expect these anomalies within the local foreign exchange market to manifest in further local currency weakness, but the central bank is likely to curb excessive naira movements through direct intervention or moral suasion.”
RMB stated the CBN continued to take a hard line on banks, having suspended nine institutions from the interbank market for failing to remit US$2,1 billion in dividends to the government.
“Once again the issue centres on US dollar scarcity as lenders struggle to source the necessary funds.”
– CAJ News