In a move to address the persistent scarcity of foreign exchange in Nigerian Deposit Money Banks (DMBs), indications are that the Central Bank of Nigeria (CBN) has concluded plans to release about $1 million to meet the demands for payment of school fees, travel allowances and medical expenses by foreign based Nigerian students, travellers and businessmen.
However, this is coming barely a week after the National Executive Council (NEC) pressed the apex bank to change its forex policy, considering the wide disparity between the parallel and the black market.
Also, Traders and analysts have said dollar liquidity remained a major challenge in the market amid surging demand pressure on the greenback by parents paying schools fees of their children studying overseas as well as travelers.
This is the latest move to ensure forex is available for selected important sectors of the economy, as industry sources believed it would address a lot of demand for forex.
“If the CBN goes on with this plan, then it is likely that we see an appreciation of the Naira. Data from the CBN reveal the CBN had reduced sales to BDC’s by as much as 98percent since 2014, dropping from $4.4 billion to just $58 million”, sources disclosed.
In a related development, the apex lender recently revealed that three key sectors of the economy had received the largest foreign exchange allocations between December 2016 and January 2017.
The CBN said out of a total of $2.83 billion disbursed during the two months to critical sectors of the economy, manufacturing, agriculture and raw materials got the lion’s shares.
CBN spokesperson, Isaac Okorafor, said these sectors were considered by government as prime target for employment generation and wealth creation sectors of the economy.
Mr. Okorafor said raw materials got $609 million and $228 million allocations for December and January, while manufacturing got $53 million and $71 million respectively.
Besides, he said about $1.839 billion and $0.989 billion respectively were utilized in critical sectors like agriculture, petroleum products and airlines, among others in the corresponding period.
Mr. Okorafor said the CBN was determined to continue to taking steps to ease the foreign exchange pressure on critical sectors of the economy.
In November 2016, the CBN supported critical sectors of the economy with about $1.07 billion equivalent of foreign exchange for agricultural machinery, industrial raw materials, education and personal travel allowances, to source for industrial raw materials and spare-parts through the interbank foreign market.
But analysts expect the central bank to allow greater flexibility on the currency this year.
“We think the most probable outcome of an FX policy adjustment is a managed float, possibly a new peg, but a full float is unlikely,” Yvonne Mhango, economist at Renaissance Capital wrote in a note to clients.
Mhango said a rise in Nigeria’s foreign reserves since November could help the bank make the adjustment at a level at which it can support the currency. She forecast a year-end interbank rate of 447 naira per dollar.