Lagos, Nov. 25, 2023: The Centre for the Promotion of Private Enterprise (CPPE) has urged the Central Bank of Nigeria to implement steps identified to reduce pressure on the foreign exchange market.
Dr Muda Yusuf, the Chief Executive Officer of CPPE, gave the advice on Friday in Lagos.
Yusuf spoke on ways to improve liquidity and stabilise the foreign exchange market.
“The CBN under the new leadership has taken some steps to clear the backlog and also impact on some banks; I know up to 70 per cent of the backlog have been cleared.
“So that for me was a major step forward to bring back confidence into the foreign exchange market.
“We have also been told of other measures that are being taken by the CBN in conjunction with the fiscal authorities to mobilise a lot more liquidity.
“For instance, we were told about the decision to securitise our dividend from Nigeria Liquefied Natural Gas and through that get some banks to give us some more funding in terms of foreign exchange.
“Then there was a decision about forward sales of crude by the NNPC. That also, the government was working out something in conjunction with AFREXIM Bank to get some dollars.
“There are also efforts around improving exports of crude oil because if we are able to improve our output, definitely our foreign exchange inflow will improve. So, these are steps that have been taken that should be effective,’’ he said.
The CPPE boss expressed worry about delay in the manifestation of tangible results.
He said, “How soon these will now begin to turn into concrete outcomes is a different thing; at least we have seen some impact it had on the naira with the clearing of some backlog and the impact it also had on the market.
“How sustainable they are again is very difficult to predict, it depends on how much success the government is able to achieve
“So the point is that if we are able to make headway or succeed with some of the efforts that have been outlined, then we will begin to see some more sustainable stability in the market.
“It’s a function of how much we are able to get, but the thing is that efforts are being made and the president too has been going around the world encouraging investors to come.
“If we succeed with that, then of course that will mean some inflows into the economy as well, although that may be medium to long term.’’
Speaking on Inflation, Yusuf noted that food inflation was influenced and controlled by foreign exchange.
He added that there was a strong relationship between the exchange rate and inflation.
According to him, if we are able to stabilise the exchange rate, we will be able to moderate inflation.
“Anytime we are experiencing a depreciation, inflation goes up because the economy is highly sensitive to developments in the foreign exchange market because of the high level of import dependence.
“Also, insecurity is affecting food supply. If we are able to deal with the insecurity problem, that will also help to moderate inflation.
“Then our currency is now very weak, all the neighboring countries are using CEFA and our products are now very much cheaper for them to buy, including food products.
“So there’s additional pressure coming from the neighbouring countries buying off these things and because the border is porous, it makes it difficult to monitor all those things.
“There’s also this regional dimension to the problem of inflation and also cost of transportation, diesel, the state of the roads, when all these are incorporated into the price, it will affect the cost of whatever food products they are carrying.
“These are the factors driving inflation and if we must tackle it, these are the factors to tackle,’’ Yusuf said.
