ACMAN Worried Over Illiquid Forex Market, Exchange Rates Volatility

The Association of Capital Market Academics of Nigeria (ACMAN) has expressed worry that despite the naira float policy that followed the unification of exchange rates, the forex market has remained illiquid, and volatility in exchange rates has persisted.

ACMAN’s President, Professor Uche Uwaleke expressed the association’s concern while briefing newsmen recently in Abuja.

Uwaleke noted that to make matters worse, the parallel premium has continued to widen seemingly defeating one of the objectives of the naira float.

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Offering some solutions, however, he said, “in view of the continued huge chunk of imports from China, we are of the view that the CBN should revisit the currency swap arrangement with China to a scale that reduces significantly the dependence on US dollars for imports from China.

“On the supply side, a lasting solution remains embarking on deliberate efforts to diversify the export base. In the meantime, the government should give support to the CBN in the implementation of the RT 200 programme especially in relation to port reforms while it works on the ease of doing business to pave the way for increased foreign investments.

“We believe that unlocking value in dead assets is one way to improve the country’s fiscal liquidity. We encourage the new administration to speed up the process of privatizing government enterprises, including the NNPCL, not by selling to a few individuals or companies but through the capital market for transparency and inclusiveness as well as explore asset securitization as a means of financing developmental projects”, Uwaleke added.

He urged the President to move speedily to ameliorate the pains brought on vulnerable Nigerians on account of the sudden removal of fuel subsidy.

“This should include scaling up the interventions in MSMEs and Agriculture as the current size of the total package is very small, at less than N1 trillion.

“We are convinced that more money can be made available to cushion the negative impact of fuel subsidy removal by reducing the cost of governance, plugging revenue leakages, and tackling the challenge of crude oil theft.

“Take for example, a recent OPEC report puts the country’s crude oil output at 1.2mbpd indicating a huge volume deficit of circa 500,000mbpd compared to the 2023 budget target of 1.69mbpd and the OPEC quota of 1.74mbpd. At a conservative crude oil price of USD85 per barrel, the loss to Nigeria in one month is over USD1 billion.

“We believe that swiftly dealing with the menace of crude oil theft will put the FG in a stronger position to scale up compensation measures including the implementation of a new minimum wage for workers as well as the programme on food security expected to drive down prices”, he added.

The Capital Market Czar said, ACMAN has followed with interest the recent engagements by the President with international investors during his recent visits to India and the UAE, adding that the association was excited by their prospects and hopes the pledges made by these investors materialise in view of their potential long-term positive impact on external reserves, forex liquidity, and job opportunities.

To this end, he said, Tinubu’s government must walk the talk regarding aspects of its eight-point agenda to do with security, rule of law, and anti-corruption.

He said, “ACMAN commends the administration of President Bola Ahmed Tinubu for recognizing the capital market as a major pillar in its economic blueprint (as contained in the President’s Policy Advisory).

“In this regard, we recommend the setting up of a Capital Market Advisory Committee (CMAC) comprising capital market experts in the Industry and the Academia whose mandate will be to provide research-based advice to the Hon Minister of Finance on PPP arrangements and various financing opportunities in the capital market.

“In conclusion, ACMAN notes with concern a recent memo by FTSE Russell, in which the Subsidiary of the London Stock Exchange (LSE) disclosed its reclassification of the Nigerian stock market index from Frontier to Unclassified market status citing difficulty by international institutional investors to repatriate capital from Nigeria.

“We think this is a premature move on the part of FTSE Russell, which has not allowed sufficient time for the forex reforms introduced by the government to mature”, he said.



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