CBN directs banks to allocate 60% of forex sales to manufacturers

As part of efforts to stimulate economic activities in the country, the Central Bank of Nigeria (CBN) on Monday directed commercial banks and other authorised dealers in the foreign exchange (forex) market to ensure that 60 per cent of total forex purchases are channelled to end users strictly for the purpose of importation of raw materials, plant and machinery.

The CBN which gave the directive in a circular dated August 22, 2016 signed by its acting Director, Trade and Exchange Department, Mr. W.D. Gotring and posted on its website said the directive affects all sources  forex interbank inclusive.

The apex bank said it took the decision following its review of returns on the disbursement of FX and observed that a negligible proportion of forex sales were being channelled towards the importation of raw materials for the manufacturing sector.

The CBN said: “Following the review of returns on the disbursement of foreign exchange to end users, it has been observed that a negligible proportion of foreign exchange sales are being channelled towards the importation of raw materials for the manufacturing sector.

“Against this background and in order to address the observed imbalance, authorised dealers are hereby directed to henceforth dedicate 60 per cent of total foreign exchange purchases from all sources (interbank inclusive) to end users strictly for the purpose of importation of raw materials, plant and machinery.

“The balance of 40 per cent should be used to meet other trade obligations, visible and invisible transactions. For the avoidance of doubt, authorised dealers are to continue to publish weekly sales of FX to end users in the national newspapers and to render statutory returns on same to the CBN promptly. Please ensure compliance accordingly, until otherwise advised.”

In an exclusive interview with Business247 News Online, the Managing Director and Chief Executive Officer of Apt Securities and Funds Limited complained that “the flexible exchange rate is not working because today you cannot get to the bank and get dollar as you want though they said the rate is flexible. If the rate is flexible, the dollar should be available to the highest bidder, but that is not the case.

“You go to the bank, you bid and they keep telling you wait for a week or a month or even more than a month and this shows the flexible exchange rate is not working.  Foreign investors won’t come to our market except there is exchange rate that allows them to go in and come out as they wish. Where you can come in and you cannot go out, will not, in any way, encourage foreign investors and without them our market will continue to go down, one because local investors don’t have purchasing power”.