The Chartered Institute of Stockbrokers (CIS) commend the Central Bank of Nigeria (CBN) for the re-introduction and re-modelling of the floating single foreign exchange policy. It is a bold and positive initiative which attest to the dynamism of the apex bank in policy evolution for the greater benefit of the economy.
The operating dynamics of the new framework as stipulated by CBN is in accordance with the tenets of democratic capitalism of which the highlights are, market-driven systems, free participation within individual limitations and the ‘’invisible hand’’.
The introduction of a Forward market to hedge volatility in the foreign exchange market, and the licensing of Foreign Exchange Primary Dealers are well commended innovations which we believe will deepen the market.
Barring systemic malfunction, CIS believes that the implementation of the new framework will boost dollar supply; and with clarity, define the exact exchange rate, ease the challenges of businesses across the board and return the economy to the path of growth.
The currency peg of the past 16 months resulted in a dearth of dollar currency and prompted large scale capital flight with the attendant growth challenges in the economy.
Foreign inflows into the capital market dropped by 32 percent in 2015, as reported by the Nigerian Stock Exchange, while the benchmark equity index fell by 17 per cent this year.
The new foreign exchange policy will bolster investor confidence, trigger inflow of foreign portfolio investments and boost the velocity of the stock market.
CIS supports the continual restriction of the 41 excluded items from the interbank foreign exchange market. The exclusion of the items supports the infant industry argument.
CIS believes that an admixture strategy of the floating foreign exchange policy, an intensive export promotion drive, support for the infant industry argument and pump priming will give fillip to the economy.
Going forward, we are sanguine on the growth prospects of the economy in 2017.