CBN Governor, Mr. Godwin Emefiele, disclosed this weekend while speaking at the annual dinner of the Chartered Institute of Bankers of Nigeria (CIBN).
The CBN on October 22 directed that from November 1, 2015, the BVN will be used as criteria for foreign exchange transaction by BDCs and banks.
This made it illegal for BDCs and banks to sell foreign exchange to anybody without submission and verification of the BVN.
Speaking on the impact of this policy on the weekly foreign exchange sales to BDCs, Emefiele said: “While it may be too soon to completely adjudicate on the merits of our policies, preliminary signs indicate that we are headed to the right direction as a people.
“For example, we have managed to attain stability in the exchange rate at about N197/$1 since February 2015, although some are not happy with us for that action. Most speculators and rent-seekers have been eliminated from the forex market.
“We have seen the number of BDC operators who purchase forex from the central bank every week drop from an average of about 2,886 to just below 1,200 BDCs, thereby giving the CBN forex savings of almost $100 million per week. This policy seems to have chased away unscrupulous BDC operators and allow only genuine operators to remain in the market.
“CBN is mindful of the short term pain of some of its recent policy but pleads for the understanding of the public as the policies are in the overall interest of the country.
“The CBN would always act in good faith to pursue the goal of catalysing job creation as well as promoting job creation and inclusive growth.
Given the sharp fall in oil prices, federation allocation to states have dropped by an average of about N2 billion monthly for each. Similarly, average inflows of foreign exchange into the CBN has fallen to by about $1.3 billion per month.
“This has led to a sharp decline in our forex reserves from as high as $37 billion as at June 2014, to $30 billion. This also resulted to speculative attack on the currency and round-tripping in the market. This incidence forced us to depreciate the naira by about 22 per cent, further leading to the gradual increase in inflation. All of these slowed down growth.
“In order to ensure transparency in the determination of the exchange rate and to eliminate the activities of speculators and rent-seekers, we closed the official central bank forex window in February and moved all transactions to the interbank market.
“Despite the significant reduction of forex inflows into the country, we continue to see the importation of items such as eggs, tomatoes, tomato purri, rice, fish, margarine and oil palm. But we know that Nigeria can produce some of these products if we set our eyes on doing so.
“Nigeria cannot continue on this path of importing everything and anything. Indeed, it is both unacceptable and unsustainable and that was the reason we decided at the central bank to prohibit items we can produce here from accessing forex from the central bank.”
“Domestic production of excluded items such as tomato paste, rice, fish, aluminum items, and others are picking up gradually. Despite the sharp drop in inflows, our forex reserves is still at about $30 billion which is enough to cover about six months of Nigeria’s imports as against the traditional benchmark of three months.
“Inflation which has been rising since this year declined marginally to 9.3 per cent in October 2015 and both lending and deposit rates have also fallen. The recently released GDP report from the National Bureau of Statistics indicates some recovery. The report indicated that our economy grew by 2.84 per cent.
“The last time we had oil prices at $50 per barrel for an extended period of time was in 2005 and our total import bill for that year was only N148 billion. Yet, in the first nine months of this year, our total import bill has already risen to N917 billion and by logical extension, it is heading towards N1.2 trillion by the end of the year.
“I am not unaware of the short term pains associated with our policy decisions, but I urge you all to understand that this time is different. This is an opportunity for us to look inwards, diversify our economy away from oil, produce locally and create jobs for our unemployed youths. Countries that successfully managed during the period of drop in crude prices are those who embraced the concept of producing and consuming locally made goods.
“The CBN would in due course embark on a national campaign called PAVE which stands for : Produce Locally, Add Value and Export.
We definitely cannot survive as a people by importing everything and anything. We are a resilient and hardworking people and I am confident that out of these difficulties would come out the best ideas. I am assured that better days are around the corner and we just cannot lose faith. This is the time to display our resilience as a nation and we must all put our hands on the deck to ensure a better economy for Nigeria”