The Central Bank of Nigeria (CBN) sold a total of $21.82billion foreign exchange to authorised dealers in 2021, compared with the $28.96billion sold by the apex bank in 2020, representing a decline of 24.65 per cent.
The CBN in its latest economic report disclosed that total foreign exchange sales to authorised dealers was at $1.65 billion in January, representing a decrease of 3.1 per cent, relative to $1.71 billion in December 2021.
A breakdown of the report revealed that foreign exchange sales at the SME window, interbank/invisible foreign exchange sales and matured swaps contracts rose by 24.4 per cent, 25.9 per cent, and 60.8 per cent to $0.14 billion, $0.18 billion and $0.21 billion, respectively, in January, relative to the amount in December 2021.
The disaggregation of authorised dealers accessing foreign exchange are those at Investors’ and Exporters’ (I&E) windows, Retail Secondary Market Intervention Sales (SMIS), Small and Medium Enterprises (SMEs) and interbank sales, Swap and the Bureau De Change (BDC) operators.
According to the report, “However foreign exchange sales to the I&E and SMIS windows fell by 13.7 per cent and 16.3 per cent to $0.58 billion and $0.54 billion, respectively, in the month under review.
“To enhance exchange rate management and achieve accurate value from import and export items in and out of Nigeria, the Bank introduced e-evaluator and e-invoicing to replace the hard copy final invoice as part of the documentation for trade transactions.
Effective February 1, 2022, import and export operations would require the submission of an electronic invoice (e-invoice) authenticated by the authorised dealer banks on the Nigeria Single Window portal – trade monitoring system (TRMS).”
The CBN in July 2021 had suspended foreign exchange supply to BDC operators, accusing them of rent-seeking behaviour and involvement in money laundering activities.
Meanwhile, analysts attributed decline in foreign exchange supply to authorised dealers to suspension of sales to BDCs operators, among other factors, stating its impact on fall in rates.
According to THISDAY, an economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, stated that the drop in foreign exchange to authorised dealers is due to scarcity.
Explaining further he said, “The problem of oil theft is affecting production and foreign exchange earnings. Revenue from oil still accounts for over 80 per cent of our foreign exchange earnings. Once we have problem with our theft, according to government, it is expected to affect capacity to fund the foreign exchange market.
There is issue of divestment in supply over insecurity and a lot investors at the onshore have moved to another country. All the companies that should produce for Nigeria to earn foreign exchange are moving because of the problems and it is reflecting in our foreign exchange earnings.”
He noted that Nigeria is facing inappropriate policies in the oil & gas sector, leading to the introduction of Petroleum Industry Act (PIA).
“It took us a long time to pass the PIA into law and on the implementation, we have been foot-dragging it. The policy environment has not been favourable to oil & gas affecting foreign exchange to key sectors that are in need of it.
Mind you, at some point in 2021, there was dwindling oil prices. Once you have such situation, the CBN tends to reduce supply. In addition, there was problem of foreign exchange policy itself. The foreign exchange policy of CBN has not been favourable to non-oil sector.
“We have seen a drop in foreign direct investment, foreign portfolio investment and export proceeds due to policies in the foreign exchange. CBN can only give what they have and the factors I have highlighted summarises it all,” he said.
Commenting, the Head Financial Institutions’ Ratings Agusto & Co, Mr Ayokunle Olubunmi, in his response said sources of accessing foreign exchange dropped in 2021 despite steady increase in global oil price amid global economy recovery from COVID-19 pandemic.
According to him, “The vandalism in Niger-Delta affected the amount CBN has in its coffer and it affected supply to authorized dealers. It is meanly a function of supply as things are getting tighter. Despite the increase in global oil price due to Ukraine and Russia war, Nigeria not benefiting due to vandalism.”
In addition, the Vice President, Highcap Securities Limited, Mr David Adnori stressed on the need of effective foreign exchange.
He said, “It is through effective foreign exchange market that we can have transparency, accountability and unified change rate can be achieved. The current system is called administrative allocation of hard currency to few authorised dealers.”
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