Financial experts and businessmen have criticised the “Naira for dollar” incentive initiated by the Central Bank of Nigeria (CBN). The apex bank had directed deposit money banks to reward beneficiaries of diaspora remittances.
In a memo dated March 5, 2021, the CBN directed commercial banks to pay recipients of diaspora remittances N5 for every one dollar in a bid to channel foreign exchange into the official market.
The incentive is also a drive to reduce inflow of dollars into the black market where rates are higher. While the CBN expects the Naira for dollar incentive to boost participation in the official exchange market, financial analysts and businessmen think otherwise.
Financial planner, Kalu Aja, in his reaction to the CBN incentive, said the action by the apex body doesn’t line up with its policy. He said CBN should devalue the naira in order to match with the black market price.
“Clearly the CBN wants Dollar inflow. It has devalued, it has prohibited, it has issued numerous circulars. However it has offered to sell its biggest contributor of FX to Mr Dangote in Naira not $ (dollar). Actions do not line up with policy.” Aja said in a note on his Twitter platform.
In his series of comments, Aja said, “CBN is not blind. The black market rate is higher than the CBN rate. Why would anyone send $ (dollar) via official means?If you want access to the diaspora funds, then devalue your currency to match the “street”. The laws of men cannot usurp the laws of economics.”
Aja added, “Remember the $ (dollar) CBN rate of N140 excludes the demand of 44 banned items. The black market $ (dollar) rate includes the full demand from all importers in Nigeria. The CBN exchange is artificial. If u can receive cash in $ (dollar) and sell to who I prefer, why is there an official rate?”
“On numerous wassapp (WhatsApp) groups, you see messages like”I have $5000, need N (naira)”. Those transactions are concluded in private.Paying N5 will not move those transactions to banks. 44 items are still banned from CBN fx auction, CBN told them to “go source their forex” They have. Why N5?” Aja said.
Another critic of the CBN initiative, Aloy Chife, Managing Partner or Saana Capital, said as long as gap remains between the official rate and black market, the incentive will not result to projected outcome.
Chife advised that the Naira should be floated, “As long as the delta between the official rate and the parallel market rate of the Naira remains negative, incentives like the CBN BOGOF (buy one get one free, or thereabouts) will not move the needle.
“Float the Naira. Let’s swallow the bitter pill in one gulp.” Chife suggested in a comment he made in reaction to the CBN naira for dollar incentive.
