CPPE calls for urgent framework to moderate forex market volatility

The Center for the Promotion of Private Enterprise (CPPE) has advised the Central Bank of Nigeria (CBN) to develop and put in place a sustainable intervention framework to moderate the volatility in the foreign exchange market.

The Center, though lauded the Federal Government for dutifully charting a new and positive course for the economy which portends bright prospects for recovery and growth, but the body believes there is the urgent need to address the social outcomes of the recent reforms, especially the inflationary pressure induced by the fuel subsidy removal.

Chief Executive Officer (CEO) of the Center, Dr. Muda Yusuf, in his review of the activities and performance of key sectors of the economy in the first half of 2023, said there were already clear indications of elevated investors’ confidence, improvement in the government fiscal space, higher prospects of exchange rate stability in the near term, and positive expectations of better economic governance.

According to him, “The short to medium term outlook for forex liquidity is very good and prospects of increased inflow of capital is very bright”.

On the other hand, Yusuf called for immediate and urgent measures to mitigate the soaring cost of living and the escalating operating and production costs, especially for of businesses.

He warned that inflationary pressures may intensify in the near term, the exchange rate may come under pressure in the short term as forex demand backlog exerts pressure on the official forex window.

“But the pressure is expected to ease before the end of the year. This would pave way for an equilibrium exchange rate which would be more tolerable and sustainable.

“With a better fiscal space, the outlook for lower fiscal deficit, moderation in the growth of public debt, reduction in debt service burden, and an improvement in the macroeconomic stability are very positive. All of these would impact on economic growth prospects in the second half of the year.”

The CPPE, called on the Government to promptly deploy measures to mitigate the current headwinds inflicted by the current reforms, demanding that interventions should be a mix of direct interventions, tax incentives for low-income employees and small businesses, reduction in import duty on some critical intermediate products for key sectors of the economy, import duty concessions for the transportation, health, power and energy sectors.

He noted that improved fiscal space created by the reforms should make these mitigating measures feasible and they have to be implemented urgently in order to give the current reforms a human face.