Following the impact of coronavirus on the economy, the Central Bank of Nigeria (CBN) has stopped local and international oil companies from selling dollars to the Nigerian National Petroleum Corporation (NNPC).
The apex bank said the move is in line with the its determination to improve foreign exchange supply to the economy as the impact of the Coronavirus (COVID-19) pandemic bites harder on the economy. The country’s foreign exchange earnings have been depleted.
CBN Governor, Godwin Emefiele, said the new dollar remittance policy will boost local dollar collections.
Emefiele broke the news during an emergency meeting with bank chief executive officers in Lagos at the weekend. He spoke of the urgent need to improve dollar supply to the apex bank, which has vowed to meet all dollar obligations to correspondent banks from importers.
The CBN’s commitment to naira stability is accompanied with new policies and bottlenecks meant to reduce dollar spending and meet critical obligations, including those to correspondent banks on Letters of Credit and other trade obligations.
The dollar is expected to be sold to the CBN at N377 to the dollar; same rate banks are to auction dollars to the regulator.
The CBN will also be granting naira and forex funding to key local pharmaceutical companies for procurement of raw materials and equipment required to increase local drug production in the country.
They are Emzor, Fidson, GSK, May & Baker, Unique Pharma, Swiss Pharma, Neimeth, Sagar, Orange Drugs, Dana Pharma, among others, hence, the need to effectively harness Nigeria’s dollar earnings in the interest of the economy.
Emefiele explained that the primary focus of the bank at this time is preserving confidence, financial stability and support for the economy.
He said, “We are committed to improving forex supply to the CBN, by directing all oil companies -international, and domestic, whether you are in the service industry, or producing, upstream, mid-stream, downstream, or related companies, to sell their foreign exchange to the CBN and no longer to NNPC, for purposes of funding even import of petroleum products, and also new policy on price modulation.”
The CBN had on Friday officially devalued the naira to N380 to a dollar. The devaluation came after over three years of push from financial market managers, the World Bank and International Monetary Fund for the local currency to be devalued.
Aside devaluing the naira, the CBN also adopted a unified exchange rate, and pushed the official rate of the naira to N376 to dollar for International Money Transfer Operators rate to banks; N377 to dollar for banks’ dollar sale to CBN and pegged CBN’s dollar sales to banks at N378 and limited dollar sales to Bureaux de Change (BDCs) to $20,000 per week.
Emefiele also advised Nigerians to begin prioritising their import needs, and focus more on sourcing raw materials and inputs locally.
Emefiele said, “In deed, there is no choice than to source raw materials locally. From the information available to us, the various lockdowns in different parts of the world, all counties are locking their borders, and making it difficult for even raw materials and inputs to leave their borders.
“So, it means we have no other choice than to look inwards, especially now we can say that those inputs and raw materials can be sourced locally.”
The CBN, in February, introduced new domiciliary account rules in which it directed that customers can deposit dollar into their domiciliary accounts but are not allowed to transfer it to another party.
Also, only electronic fund transfers into domiciliary accounts can be transferred from such accounts to third parties while cash deposits into such accounts can only be withdrawn in cash.
Another policy encourages foreign portfolio investors to invest in high yielding Open Market Operation (OMO) bills at 14 per cent while local investors are restricted. Foreign holdings of OMO bills (CBN’s investment instrument to control liquidity) account for over $5 billion of the $37.3 billion foreign reserves.
Besides, it restricted importers of milk from accessing foreign exchange from official market. It limited the importation of milk and other dairy products to six firms- Friesland Campina WAMCO Nigeria; Chi Limited; TG Arla Dairy Products Limited; Promasidor Nigeria Limited; Nestle Nigeria PLC (MSK only), and Integrated Dairies Limited.
According to the policy guideline, all Forms ‘M’ for the importation of milk and its derivatives will only be allowed for the aforementioned companies.
Analysts insist that these new policy on dollar collections will help the apex bank harmonise Nigeria’s foreign exchange earnings and meet local and international obligations.