To crease the list of items notvalid-for foreign exchange funding above 43 items to ease pressure on the country’s current account, CBN Deputy Governor, Economic Policy, Edward Lametek Adamu has said.
The advice was contained in his personal statement in Monetary Policy Committee (MPC) report released on Wednesday by the apex bank.
Adamu said the list of items-not-valid for funding from the foreign exchange market should, perhaps, be expanded to ease the pressure building on the current account and save foreign exchange for the country.
He said that as the outlook for the foreign exchange supply side continues to be uncertain, the CBN must manage the demand side effectively to keep the exchange rate stable. In this regard, the restriction on the use of foreign exchange remains relevant and the list
CBN urged to raise forex restriction list over current accountHE Central Bank of Nigeria (CBN) has been advised to in of items-not-valid for funding from the foreign exchange market should, perhaps, be expanded to ease the pressure building on the current account.
According to him, the data available to the Committee suggested to me that the credit constraint in the economy was alleviating, owing mainly to the Differentiated Cash Reserve Requirement (DCRR) and the minimum loan-to-deposit (LDR) ratio specified by the Bank during the year.
Between January and October 2019, gross credit expanded by over N1 trillion adding that much of the increase actually occurred between June and October 2019.
The sectors with the largest increases in credit during the period include agriculture, manufacturing, consumer credit and general commerce. “Importantly, both measures (DCRR and LDR) had not resulted in rapid monetary expansion as key monetary aggregates continued to be significantly below their indicative benchmarks.
I figured that the immediate risks to price stability were not necessarily emanating from the growth in credit, but more crucially from a variety of structural constraints in the economy, preventing efficient and effective circulation of goods, particularly food,” he said.
Adamu said evaluation of the economy’s overall performance in the first 11 months of 2019 and the short to medium-term outlook, showed two defining elements – credit to the real sector and the naira exchange rate. On credit, he said the bank has been able to turn around the situation through the Loan to Deposit Ratio (LDR) and the Global Standing Instruction (GSI) which aims to reduce credit risk.
Given that interest rates have started to moderate and banking industry non- performing loans (NPLs) trending towards the regulatory five percent level, money market activities could only be expected to buoy in months ahead.
He said the naira exchange rate stability has been the central driving force of the current recovery adding that the most important medium-term challenge for monetary policy would be how to preserve the stability of the exchange rate of the naira.
Adamu also advised the Federal Government to maintain the focus on diversifying the economic base and growing revenue.
It is especially relieving that the process of the 2020 budget has very well advanced which means implementation could begin much earlier than previously experienced. This should accord economic activity and growth recovery the much-needed push in 2020.