MON, 29 AUGUST-In view of the dismal state of the Nigerian economy, the Lagos Chamber of Commerce and Industry (LCCI) is calling for a review of the current trade policy to reduce pressure of cost on investors and citizens.
In a statement signed by Muda Yusuf, director-general of LCCI, and released on Sunday, the Chamber says it is right for the central bank to penalise banks for proven infractions, but cautions that this should be done in a way that minimises collateral effects on investors and the larger economy, given the high sensitivity of the economy to developments in the forex market.
The Central Bank of Nigeria (CBN) recently suspended nine banks for failing to remit outstanding NNPC funds in their vaults into the Treasury Single Account.
“This is even more so at a time when the economy is grappling with a major confidence issue in the forex market. There should be more creative and less disruptive ways of imposing such sanctions. Many innocent investors and citizens are already bearing the brunt of this action given the unprecedented hike in naira exchange rate,” LCCI says.
According to the Chamber, the directive to allocate 60 percent of FX to manufacturers did not indicate any HS Code to properly define what would qualify as raw materials and machineries. The Chamber says banks may give discretionary interpretation regarding what qualifies as raw materials and machineries.
“Sectors outside the manufacturing sector account for over 85 percent of the country’s GDP and jobs in the economy. They all have varying import contents in their operations. Therefore, if a minimum of 60 percent of all forex allocation goes to manufacturing for raw materials and machineries, what happens to other sectors?
“Currently, petroleum products imports are priority and could take another 25% of foreign exchange. This implies that the rest of the sectors would settle for the balance of 15 percent. This is clearly not a sustainable framework,” the Chamber observes.
The Chamber notes that it is important to recognise the interdependence of sectors and the integrated nature of the economy, adding that all sectors complement one another for the economy to function properly.
“Fiscal policy measures are better suited to address sectoral imbalances than monetary policy. Such policy tools include import tariffs, taxation and other incentives. Above all, there is need to upscale infrastructure investments very urgently. These are the more effective ways to fix the structural problems of the economy than monetary policy. What is key for monetary authorities is to ensure that financial markets are efficient and transparent, and to ensure that there is discipline among players,” it adds.
