CPPE Urges New CBN Governor to Prioritize Clearing Forex Backlog – The Centre for the Promotion of Private Enterprise (CPPE) has strongly recommended that Olayemi Cardoso, the freshly appointed Governor of the Central Bank of Nigeria (CBN), prioritize addressing the substantial forex exchange obligations backlog in his initial days in office.
In a press statement titled “Ten Point Agenda For The CBN Governor” released on Sunday, the CPPE, a non-governmental organization championing private enterprise in Nigeria, stressed the urgent need to re-establish confidence in the FX market. This comes amid the widening gap between the official and parallel exchange rates, further compounded by the naira’s consistent depreciation against major currencies.
With the naira recently plummeting to N995 against the U.S. dollar, the CPPE emphasized, “The clearance of the backlog of forex obligations should be accorded high priority to restore the confidence of domestic and foreign investors.”
The organization has historically advised the CBN to execute transparent interventions in the forex market to limit volatility. CPPE’s recent recommendations also include the establishment of an autonomous banking window to facilitate free currency trading, aiming to discourage the sale of remittances in the informal ‘black market’.
Additionally, the CPPE’s 10-point agenda underscores the significance of deepening the financial system. This involves mobilizing financial resources to support sectors currently facing financial deficits. They noted with concern that in 2022, credit provided by the banking sector to Nigeria’s private sector was a mere 20.6%, below the African average and significantly lower than the global average.
Furthermore, they criticized the inadequate credit access for small businesses, which contribute approximately 50% to Nigeria’s GDP. According to the CPPE, these businesses can access only about 1% of the available credit within the banking system.
Several other recommendations were highlighted:
- Efficiency of the Financial System: Address the wide spread between deposit and lending rates, which hampers investment and savings growth.
- Bank Capital Requirements: Review the capital requirements in light of the depreciating domestic currency to ensure stability in the financial system.
- Fiscal Deficit Financing: Maintain it within statutory limits to prevent detrimental impacts on the macroeconomic environment.
- Naira Redesign Policy: Suspend this policy indefinitely, as there seems no compelling reason for its introduction.
- Cost & Tenure of Funds: Address the high lending rates detrimental to economic growth and investment, especially affecting SMEs.
- Banking Sector Risks: Reduce concentration risks within the banking system to manage potential systemic threats.
- Stakeholder Engagement: Engage proactively with public and private sector stakeholders, fostering collaboration and partnership.
- Corporate Governance: Uphold high governance standards to maintain the CBN’s credibility and integrity, ensuring transparency and fairness in regulatory processes.
Muda Yusuf, the CEO of CPPE, emphasized that the NEITI report is a valuable public resource. He mentioned that while NEITI provides crucial data, it’s up to the citizens, media, civil society, and legislature to utilize this information and hold the government and related companies accountable.
In summary, the CPPE’s comprehensive recommendations underscore the pressing challenges facing Nigeria’s financial sector. With Cardoso at the helm of the CBN, the nation watches closely, hoping for reforms that can stabilize the economy and instill confidence in its financial markets.