Inability to regain investors confidence responsible for economy distress-LCCI

Inability to regain investors confidence responsible for economy distress-LCCI

 

The Director General of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf has said inability to regain investors confidence is the major cause of Nigeria economy lull.

Commenting on the state of the economy, Yusuf said major challenge facing the Nigerian economy at this time is the inability to regain the confidence of investors, both local and foreign.

According to him, the instability and inconsistency in the foreign exchange management policy have been complicating matters.

“The economy has a major structural defect of being heavily import dependent. This cannot be fixed in the short term. Therefore, the shocks arising from the collapse of oil price and the corresponding depreciation in the Naira exchange rate were inevitable. But the policy responses could make a whole lot of difference in the profundity of the impacts of these shocks on the economy and the citizens”, he said.

Yusuf noted that, the autonomous supply of foreign exchange had been a higher than the Central Bank of Nigeria (CBN) supply, saying it has virtually dried up because of the collapse of investors’ confidence.

“For an economy that is in fragile mode; and for an economy that is highly exchange rate sensitive, policy actions and pronouncements that could impact the market should be done with utmost caution and care. This is imperative to avoid unintended consequences which may hurt the economy in very profound ways.”

Yusuf lamented that, many innocent investors and citizens are already bearing the brunt of this action given the unprecedented hike in Naira exchange rate. “Ongoing forex transactions in the affected banks have been stalled with serious consequences for investors.”

He said, the second major policy development that could pose a risk to the stability and transparency of the foreign exchange market is the recent policy on sectoral allocation of foreign exchange.

“The CBN circular did not indicate any HS Code to properly define what would qualify as raw materials and machineries. The first concern will be that of definition. The result of this will be discretionary interpretation by the banks as what qualifies as raw materials and machineries.
The second major concern is the potential crowding out of other sectors in the forex market. Sectors outside the manufacturing sector account for over 85 per cent of the country’s GDP and jobs in the economy, they all have varying import contents in their operations”, he said.

He explained that the sustainability of the forex sectoral allocation policy is in doubt, ‘it could only create more confusion in the foreign exchange market’.

Yusuf however implored CBN to review current trade policy measures in order to reduce the pressure of cost on investors and citizens saying, the exchange rate depreciation has an inherent structural correction effects on the economy.