CBN urged to review capital control, FX policies
Afrinvest Research has stressed the need for the Central Bank of Nigeria (CBN) to address capital control policies and the multiplicity of the foreign exchange (forex) rates, which have continued to hinder the inflow of forex into the economy.
The investment firm in its 2023 consumer outlook survey stated that the policies have impacted negatively on foreign portfolio investment (FPI) and Foreign Direct Investment (FDI), which are currently at the lowest level in more than half a decade.
According to the firm, the RT-200 FX programme, Naira-4-Dollar Rebate and other policies created to improve remittances are relatively unattractive to lure exporters and Nigerians in the diaspora to the official window given the large spread between the official and parallel market rates.
“We recommend that the CBN rethink its strategy around the anchoring of inflation expectations – the reasons for another interest rate hike. If the overall theme is to tame monetary-induced inflation, financing conditions should reflect the same. However, the treasury bills rate has remained well below both the MPR and inflation rate).
“Additionally, the apex bank’s policies including the cashless programme should be executed to complement its price-stability objective while fiscal interventions and FG overdraft financing should be reviewed in light of current realities.”
Also, the firm noted that because the cost of obtaining cash, as well as electronic fees, have fed into the price of food and services in the economy with disruption to manufacturing and some other real sector activities while worsening the supply-side challenges, the high inflation rate debacle would continue to linger as long the CBN continues to prioritise fiscal expansion goals.
Thus, it suggested that the CBN’s recommendation for the reduction in the national debt level should also include a reconsideration of the apex bank’s recent approach to funding the FG contrary to its act.
“Precisely, overdraft to FG is a major factor that is expected to take the national debt level to an unprecedented and unsustainable high.
As of Q3:2022, total debt stood at N44.1 trillion with the securitisation of ways and means projected to edge debt stock to N67.8 trillion. By implication, we project that debt-to-GDP ratio could surpass the Debt Management Office threshold of 40 per cent before year-end,” it stated.