You’re Wrong! – CBN Rejects Atiku’s Proposal, Says Monetary Agenda Calamitous

• Partners EFCC on smuggled goods  

BY COBHAM NSA, ABUJA – The Central Bank of Nigeria (CBN) says implementing the Peoples Democratic Party (PDP) presidential candidate, Atiku Abubakar’s proposal to freely float the exchange rate will be calamitous for the Nigerian economy.

According to the CBN Governor, Godwin Emefiele, having reviewed the position canvassed by Alhaji Atiku and some critics, the Monetary Policy Committee (MPC) “concluded that it would be wrong”, adding; “It is as good as saying that we should go back to the era of Structural Adjustment Programme (SAP) in Nigeria.”

Emefiele, who briefed journalists on the outcome of the first MPC meeting for year 2019, said: “The implication can better be imagined. It will certainly lead to capital flight; lead to massive depreciation or devaluation of the currency; and ultimately to currency crisis in Nigeria; and I think, we should all know that it is a road to perdition to ever go in that direction.”

This is even as the apex bank defended its policy of restricting importers’ access to official foreign exchange for 42 items, insisting that it is appropriate to encourage local production of the banned items as well as check obvious drain on Nigeria’s foreign reserves

Among items on the foreign exchange restriction list are rice, poultry and eggs, wooden doors, toothpick, margarine, matches, palm produce, cement, fertiliser, beef, vegetables and iron rods.

Emefiele, who explained that the CBN does not intervene in the market for demand and supply of foreign exchange, said; “Normally, the Central Bank as an independent institution is apolitical, but it is also important that at the MPC meeting today, we asked ourselves if there is any merit in it to begin to say that we should look at free-floating the currency or that we should allow free import of goods that we have restricted. The MPC came to a conclusion that this was a wrong premise.”

He said the MPC feels that it would be unhelpful to the economy for the country to encourage importation “of items that can be produced in the country today, exporting jobs from Nigeria to foreign countries, and we say we have the interest of Nigeria at heart?

“We don’t agree with anybody. It is a wrong premise to say that you will allow imports to just flood the country just because you want to please anybody. It is not in our interest.

“We will remain apolitical. We will not want anybody to drag the central bank into issues that are within our remit otherwise, we would respond to it”, the CBN governor said

“These results are because of the actions of the government supporting the monetary policy of Nigeria today and we will be aggressive in supporting small holder farmers that cultivates these items,” he said.

On import restriction, Mr Emefiele said the apex bank would sustain its aggressive posture to ensure any food item currently being imported that can be produced in the country comes on the banned list.

According to him, there is an on-going review of other items and once the CBN is convinced that there are local companies with capacity to “sufficiently produce the said items; they would also be placed on the foreign exchange restriction list.”

“We think that the initiatives CBN has put in place in the past to cut import and diversify the structure of the Nigerian economy is yielding results and we will continue to be that aggressive.”

The CBN boss hinted that that the apex bank, in partnership with Economic and Financial Crime Commission (EFCC) would investigate any company, any individual suspected of bringing these items “either through any border or through smuggling of any means for money laundering and economic sabotage.

“If we discover that these companies or individuals are involved in any economic sabotage, we will write to all the banks, we will blacklist those companies and individuals running those companies.

“The companies can no longer operate any bank account in any Nigerian bank and there will be no need to talk about prosecuting you but we will not allow you do business again in Nigeria,” Emefiele threatened.

Also speaking on interest related to loans for fuel imports, the CBN governor said commercial banks have been directed to put a temporary hold on them.

“We have indeed told banks to suspend interest on those loans from July 2017. They should collect whatever credit notes have been issued and credit the account of petroleum marketers immediately. If any bank refuses to do so, the marketers or their associations are free to report to CBN, mention the name of the bank and we will appeal to the bank to please carry out this instruction.”

Also announcing that the CBN and MTN had successfully resolved issues surrounding the alleged illegal repatriation of 8.1 billion dollars, Emefiele said; “I am glad to tell you in November, we held a round of meetings with MTN officials even from South-Africa and by December, we concluded those engagements and the matters were resolved.”

“It resulted in a notional reversal. Let me make it clear that it is not a fine or a penalty. It was a notional reversal of 53 million dollars amounting to about N19.5 billion”, the CBN governor explained.

Similarly, the CBN governor urged the Federal Government to take urgent steps towards reviewing the current Value Added Tax (VAT) policy as part of measures to protect local industries, especially the Micro, Small and Medium Scale Enterprises (MSMEs) in the country.

However, rising from its meeting, all the 11 MPC members voted for unchanged policy parameters that retained their current levels. With their votes, the Committee kept the MPR at 14 per cent; the CRR at 22.5 per cent; the Liquidity Ratio at 30 per cent; and the asymmetric corridor of +200/-500 basis points around the MPR.

Defending the Committee’s decision, Emefiele said given the “observed risk confronting the economy, including the global and domestic inflationary pressures, which have intensified the risk of currency depreciation, the MPC was of the view that a loosening option was very remote” adding that; “Weighing the balance of its judgement on price stability conducive to growth, the MPC felt that tightening would result in the loss of the gains so far achieved, noting that this may drive the banks to reprice their assets; thus increasing the cost of credit as well as elevating credit risk in the economy. It will also worsen the position of non-performing loans of the banks.”