CBN Moves For New Forex Rules As Finance Minister Expects $10billion Inflow

CBN Moves For New Forex Rules As Finance Minister Expects $10billion Inflow
Mr. Olawale Fasanya

Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun on Monday said that the economy would  receive $10 billion in foreign exchange inflows in the next few weeks to ease liquidity pressure  in the foreign exchange market.

Edun said this during a panel session at the ongoing 29th Nigeria Economic Summit (NES) in Abuja.

The Minister added that  the government has a clear view of the inflows into the country in weeks rather than months.

He said, “In addition, from the supply of foreign exchange through NNPC, increased production, reduced expenditure, from transactions such as forward sales, from our discussions with sovereign wealth funds, that are ready to invest and provide advance alongside that investment, there is a line of sight of $10 billion worth of foreign exchange in the relatively near future in weeks rather months.”

Edun said President Bola Tinubu, on Thursday, signed two executive orders allowing the domestic issuance of instruments in foreign currency and allowing all cash outside the banking system to be brought into banks.

“Mr. President announced that he had taken measures to ease illiquidity in the forex market which we know is very problematic at this time,” Edun said.

“The market is illiquid; it’s not functioning properly because there is no supply and there are various reasons for that.”

Meanwhile, the Central Bank of Nigeria, CBN, has hinted it is working on new foreign exchange market rules.

Dropping this hint in a panel session of the on-going 29th edition of the Nigerian Economic Summit in Abuja, CBN Governor, Yemi Cardoso, said the present travails of the Nigeria’s foreign exchange market connected to the entire fiscal and macroeconomic space, adding that any discussion on exchange rate in isolation would be shortchanging the narratives.

He added that the difficulties in the fiscal and monetary space have been tackled by the two major policy actions of the Federal Government which are the removal of the fiscal bleeding in petrol subsidy and the unification of the exchange rate.    

Referencing those two measures, Cardoso said, “Now, happily, we have a situation where the bleeding with respect to Nigeria’s resources has stopped. And I refer specifically to the subsidy, and to be honest, when people say they are concerned, yeah, I get it. But frankly, I think that was the time to be concerned. Right now, from what I can see, we are on the path of rebuilding, and that is so important for us on the monetary side. If the fiscal is bleeding, it makes life very difficult for us on the monetary side. So to the extent that that has stopped. It’s a big deal”.

“This is something that we’ve tried to do for successive years and failed. And the result of not doing it, we’ve all seen. And now, suddenly, it has stopped.  

“In addition to that, the attempt at unification of the foreign exchange market, fine, not by any means perfect, but at least substantial more revenues have come in. So the combination of those two things, in addition to some of the other efforts that have been done on the fiscal side, are commendable, and in due course, we will see the outcome.

“So when people say they are concerned, they are worried, they are this and that. The time to do that, quite frankly, has gone. It has gone.”

“There are more difficult decisions to be made, no question about it, but the two very difficult decisions, painful, they’ve been taken. And now it is a question of managing things till we get to where we really want to get to.

“And that’s where we really want to get to is a place where we have a foreign exchange market that is fit for purpose; A foreign exchange market that works for everybody; A foreign exchange market where you know the rules; A foreign exchange market where there are no policy flip-flops; A foreign exchange market where you can predict.

“That’s the bigger deal. That is what we need to do. If we are going to be able to create an ecosystem that will out-survive us all and we will go to sleep on, we’ve got to do some basic things, some of which we are already attempting to do, although it’s early days, but we are doing them.

“I’ve just alluded to something, which is that we do need to have a situation where the rules are clear to all that engage in our business. And we are going to come out with that. We are going to come out with an elegant document that will tell you exactly what the rules are.  

“I understand the issues with respect to people feeling some discomfort with the way the market (forex) has gone off in recent times. But my take is that we will come out with something that is representative of the true market, because the market itself, over time, will adjust to some of these things”

Source: Vanguard.

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