An economist, the immediate past Director General of the Lagos Chamber of commerce and industry (LCCI), Dr. Muda Yusuf has expressed concern over the rate at which the Federal government is borrowing from the central Bank of Nigeria (CBN) through the instrument of ‘ways and Means’.
Speaking on Thursday at the monthly forum of the Finance Correspondents Association of Nigeria (FICAN) with the theme: “post COVID-19 economy in H1:2021 and outlook for financial services sector”, Dr. Yusuf said it is worrisome that so far this year Government has paid about N480bn in interest alone for loans obtained through ways and means from the CBN while about N1.8tn has been expended on debt servicing.
He noted that the law in Nigeria allows for loan to Government not exceeding 5% of actual revenue of the previous year adding that the current situation has inflationary implications resulting in continued devaluation of the local currency and increasing rate of poverty in the country.
As part of strategy to encourage the flow of foreign exchange into the economy, Dr. Yusuf called on the Nigerian authorities to create an enabling environment for export business and play down on forex demand management while concentrating more on easing the supply side.
Nigerian economy, according to him, has the capacity to attract a lot of foreign exchange because of its size, stressing that there are potential and opportunities that are still untapped.
“Foreign exchange earnings is all about creating the environment for more inflows to come in the form of diaspora remittances, foreign direct investment inflows, foreign portfolio investment, export proceeds among others.” He said.
Specifically, the former LCCI DG observed that exporters are passing through a lot of difficulties in the country, adding that the way to attract foreign exchange is to export more ” if you go to the ports and see what exporters are going through, you feel sorry for them and the Nigerian economy in general, we say we don’t have foreign exchange but the way to attract foreign exchange is to export. However, exporting is almost a nightmare in Nigeria.”
“For instance, the process for export cannot begin until an exporter has loaded the truck and paid the truck owner. After paying the truck owner he will go through about two weeks of inspection and documentation. After which he will also face the traffic gridlock and before they could finish the inspection and documentation some of the products must have gone bad especially the ones that are perishable,” he emphasized.
Dr. Muda Yusuf.
Dr. Yusuf also observed that the policy of exchanging export proceeds at the Nigerian Autonomous Foreign Exchange (NAFEX) rate is not fair to the exporters because of the gap between the official and unofficial exchange rate windows adding that this was one of the reasons why some of the exporters hide their export proceeds.
“Exporters should have free access to their export proceeds and be incentivised, just like the Nigerian diaspora were encouraged with the Central Bank of Nigeria’s naira-for-dollar exchange rate policy for remittances.” He said.