LCCI: FX volatility hampering imports

1 week ago 16

The Lagos Chamber of Commerce and industry (LCCI) has lamented that the on-going foreign exchange (forex) volatility in the country is making many investors experience difficulties in accessing FX for importation of raw materials, equipment, and critical inputs for production and processing. Consequently, the Chamber emphasised that the situation was taking a huge toll on capacity utilisation, economic recovery, and sustainability of businesses in the production sector as scarcity of FX still biting in all fronts of manufacturing. President of LCCI, Mrs. Toki Mabogunje, made this known in her address on the state of the economy in Lagos recently, where she opened up that the forex situation was worsening all facets of the country’s economy. Mabogunje said: “The forex market is still faced with liquidity challenges.

Many investors are lamenting about the difficulties in accessing foreign exchange for the importation of raw materials, equipment, and critical inputs for production and processing. The situation is taking a huge toll on capacity utilization, recovery, and sustainability of businesses in the production sector.” Speaking further, the LCCI president admitted that the multiple exchange rate systems had been creating uncertainty and arbitrage. According to her, it is very unfortunate that the move to apply tightening measures have always failed to stabilise exchange rate in Nigeria. addin She said it only redirects FX transactions to the underground arrangement, with unintended consequences of increased pressure on the exchange rate and creating wide premium between the official and parallel market exchange rate.

“The Lagos Chamber welcomes the adoption of the Nigerian Autonomous Foreign Exchange Rate (NAFEX) as the official exchange rate. “The unification is expected to improve the country’s currency management framework given that the multiple exchange rate systems had been creating uncertainty issues and sources of arbitrage. “The development is expected to bolster the confidence of foreign investors in the economy.

The move will also help the country to unlock external financing opportunities particularly from key multilateral institutions such as the World Bank and the IMF, which had for long advocated for a unified and flexible exchange rate system. “It is, however, noted that whenever there is a free fall of Naira Exchange Rate, at the parallel market segment, as we are currently witnessing, the Central Bank of Nigeria (CBN) apply demand containment and/or price control measures as seen from the 43 items ban and quest to peg the exchange rate of the naira.

“Tightening measures had always failed to stabilise the exchange rate in Nigeria, it only redirects FX transactions to the underground arrangement, with unintended consequences of increased pressure on the exchange rate and creating wide premium between the official and parallel market exchange rate {N162 premium gap between I&E window rate of N412 (CBN) and the parallel market rate of N574 (EIU).”

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