Showing posts with label CBN's New Monetary Policy In Nigeria. Show all posts
Showing posts with label CBN's New Monetary Policy In Nigeria. Show all posts

Wednesday, September 2, 2015

Nigeria: CBN's New Policy Is Harming Small Scale Businesses

By Okey Ndibe 
President Muhammadu Buhari has yet to outline the direction and goals of his economic policy. Even so, major players in the country’s economy are already feeling the impact of specific policy decisions as they are emerging. For a wide segment of these critical players, the impact is negative, even grave. 

Under Mr. Buhari’s watch, the Central Bank of Nigeria has banned access to foreign exchange to certain categories of importers, including those who bring in toothpicks, rice, vegetable oil and tomato paste. The bank has also placed severe impediments on other businesses, among them manufacturers that import machinery and other goods. 
The motives behind the bank’s recent monetary policies may seem sound—as former Governor Peter Obi recently told reporters in Awka, the capital of Anambra State—but Nigerians appear to be worse off for them. 
With the price of crude oil showing no signs of going north soon, Nigerians are in for a long season of hard times. We just came off an electoral season in which all manner of politicians mopped up dollars for their campaigns. If you factor in the flight of capital—as many foreign and local institutional investors, scared of post-election uncertainty, pulled out of the stock market—the picture is of an economy certain to pass through a significant phase of scarcity and painful adjustment. The pressure on the naira remains enormous, and has led to a significant drop in the currency’s value.
The CBN’s response has been to use monetary policies to defend the naira. In pursuit of this defensive stance, the bank has chosen the role of an umpire determined to favor some players in the economy while rigging out other players. It has given the red card to importers of certain commodities. The bank also made it significantly more difficult for Nigerians to make transactions with their domiciliary accounts. It prohibited cash deposits into such accounts, and set new limits for cash withdrawals from accounts. During foreign trips, the daily withdrawal limit is N60, 000 or $300, a rule that defeats the gain of joining the global financial village of electronic bankcards.