CBN explains naira's fall
From Madu Onuorah, Abuja
GOVERNOR of the Central Bank of Nigeria (CBN), Prof. Chukwuma Soludo, yesterday told the Federal Executive Council (FEC) that measures were in place to shore up the value of the naira "in a matter of days."
Soludo, who spoke at a special briefing of the Council, said the measures were to ensure that 95 per cent of legitimate businesses were done by the banks at the official rate of N150 to the dollar.
Part of the measures, he noted, were also to ensure that the parallel market remained unattractive to genuine businessmen.
Soludo, who briefed journalists at the end of the Council meeting alongside Minister of Information and Communications, Prof. Dora Akunyili and Minister of Youth Development, Akinlabi Olasunkanmi, said investigations had shown that most of the transactions in the parallel market involved those who wanted to avoid documentation, adding that they were more like smugglers and money-launderers.
According to the CBN governor: "We briefed the Council on the developments in the foreign exchange market and the exchange rate regime, especially at this time of global financial crisis. We tried to put it in the global context, that this is what is going on globally, that this is a consequence of the unprecedented global crisis that we are having. Resource flows and capital flows around the world are frozen up. Nigeria depends for more than 95 per cent of its foreign exchange earnings on oil, and the price has also crashed to the extent that from about July last year, the outflow of foreign exchange has actually far outstripped the inflows. In fact, last month, we received about $800 million when last year we were selling about a billion dollars a month to the bureaux de change.
"In fact, up to January, February this year, we were selling about $800 million a month to the bureaux de change alone not to talk about the official window. But the total inflow last month was about $800 million while the total inflow this month is about $691 million. Therefore, since no one knows how long the global financial crisis will last, as a country, our national strategy should be to conserve the foreign exchange that we have so that even if the crisis lasts for an extended period, we as a country will continue to guarantee access to foreign exchange for end users, for legitimate business for the duration of the crisis.
"We also briefed the Council on the various measures we have put in place on reverting to the Retail Dutch Auction System, getting all inflows from official sources now to the Central Bank and, of course, managing the official exchange rate with a band of plus or minus three per cent. We are also trying to emphasise, and this is very important for Nigerians to know, that the official exchange rate at the CBN window that you will go to bank and obtain has hovered between N144 and N150. It has never exceeded N150 since this year. And that is the exchange rate at which about 95 per cent of legitimate transactions take place.
"We have stopped supplying foreign exchange to the bureaux de change. And that is why you are seeing the parallel market rate beginning to soar, simply because we couldn't afford to continue the way we were doing before. But now, we are opening a new window. We are supplying foreign exchange through the banks. At least, that we can monitor and make sure they comply with documents requirements."
Soludo added that FEC was also told that the reforms would make sure that people making "most of the legitimate transactions for foreign exchange, be it for payment of school fees, for mortgages abroad, medical purposes, businesses, or personal travel allowances can now go to their banks and get them. Whatever the amount, the banks will bid for them and transfer these monies for you. If you are also importing goods, $10,000, $15,000, $50,000 whatever it is, you can go to your banks and bid for foreign exchange and obtain at the official exchange rate. But for those who don't want to pay duties, those who want to launder money, those buying money to keep under their mattresses, when we are capturing most of the legitimate transactions, we will then ask the question who are the people going to the parallel market?
"It is for you in the media to help us in communicating these facts to Nigerians; that the exchange rate for the naira is the official exchange rate because that is where more than 95 per cent of the transactions take place. It is not the people who are smuggling goods, people who want to avoid paying duties, people who are laundering money; this is not the rate of the market that should be used to talk about the exchange rate for the naira. With the new reform and our decision to now fund the exchange rate operated by the banks... we will also be able to make cash available to them. We believe that the rate will be crashing down very seriously in the days ahead and that most of the transactions in the other market will be those who want to avoid documentation."
Asked if the CBN could meet the demands given the fact that the government was receiving reduced foreign exchange, Soludo said the signals from rates at the various markets as at yesterday's morning revealed that the rates had begun to creep back.
He said the naira went as high as N190 last week but as at yesterday, it was being bought at N178 and sold at N181.
FEC also approved the implementation of the Nigerian Youth Employment Action Plan (NIYEAP) from 2009 to 2011 as presented by Senator Olasunkomi.
It also approved the short-, medium- and long-term strategies for addressing the goal of the action plan for job creation. It equally approved the establishment of the National Employment Council (NEC).
The action plan, according to Akunyili, was developed by the Ministry of Youth Development in collaboration with development partners like ILO, UN agencies, youth organisations, state ministries responsible for youth development and other stakeholders.
Prof. Akunyili noted that the action plan was to address the menace of unemployment and under-employment. The plan is to adopt mainstreaming approach which addresses all components of job creation across ministries, departments and agencies and proposes solutions under four main themes of employability, entrepreneurship development, employment generation and equal opportunities. The plan is to also pave the way for the creation of one million jobs this year.
She said the Yar'Adua's administration attaches priority to the issue of employment generation and human capital development in the national seven-point agenda.
Meanwhile, the Nigeria Labour Congress (NLC) has urged the National Assembly to conduct a public hearing on the continued downward slide of the naira.
The Vice President of the Congress, Isa Aremu, who stated this yesterday, called for the resignation of Soludo for failure to halt the devaluation and inability to tame the rising lending rate.
His words: "Let me say this, while we are celebrating the gathering of the about N1.1 trillion pension fund in just over five years, that gain is at risk if the continued devaluation of the naira is not halted by the CBN. When Soludo took over, the exchange rate was about N90 to dollar and today, we are seeing a different story.
In fact, he was appointed to remedy the situation when he took over from Chief Joseph Sanusi who was sacked for not being able to tame the exchange rate. Soludo promised that the bank consolidation will grow the economy as the bank will have more money to put into the productive sector of the economy. But today, we know better. Under the present condition, only cocaine and drug business people can borrow money at 27 per cent and make a return in their investment. The National Assembly should wake up and organise a public hearing on how to rescue our economy. President Umaru Musa Yar'Adua must also make this economy work because it is not working as at today.
