A New Form of Impunity? -By Soji Apampa

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Soji Apampa

Soji Apampa

 

…by closing the formal foreign exchange (FX) window, allocation of foreign exchange, even if to BDCs and to Banks for “essential” imports, will now become more of a discretionary affair. Nigeria has one of only a very few, if not the only Central Bank that sells foreign exchange directly to BDCs. For those punters who have positioned themselves behind the quietly admitted BDCs, in a time of scarcity, there is great opportunity to round-trip foreign exchange (FX) and make a killing. Was the government aware of what can only be described as an unintended consequence of this policy?

How and when the Nigerian economy will pull back from its current decline is still a bit of a Chinese puzzle. In the meantime, the naira continues its slide against major international currencies, state governors grapple with their debt burden, politicians bicker over who-gets-what and the uncertainty over Nigeria’s immediate economic prospects is starting to breed fear and doubt within the general public. Many reckon the non-appointment of ministers and others by the president should be a source of worry and therefore the suggestion that this might not be till September 2015 is a subject of grave concern for them. Even if this tardiness is all for a good reason and for the good of all, it seems it is likely still to be at a price – a loss of some goodwill from the people and a loss of momentum with which the president could have pushed through some early successes. There is, perhaps, one other price worth drawing his attention to.

One might say the CBN Governor has to be careful not to be seen to have acted out a new form of impunity when the public takes his antecedence into account as the former MD/CEO of Zenith Bank, the largest FX trader in Nigeria.

While all the politicking is going on and presidential attention appears diverted from “smaller” issues, the real punters may well be placing their bets. In a bid to save Nigeria from “wasting” foreign exchange on what the Central Bank considers non-essential, the Bank has very kindly adjusted Nigeria’s trade policy and re-ordered our priorities in one fell swoop. What is not evident to all is that despite the window to register new Bureaus de Change (BDCs) closing, a good number of new ones have emerged after the deadline. Furthermore, by closing the formal foreign exchange (FX) window, allocation of foreign exchange, even if to BDCs and to Banks for “essential” imports, will now become more of a discretionary affair. Nigeria has one of only a very few, if not the only Central Bank that sells foreign exchange directly to BDCs. For those punters who have positioned themselves behind the quietly admitted BDCs, in a time of scarcity, there is great opportunity to round-trip foreign exchange (FX) and make a killing. Was the government aware of what can only be described as an unintended consequence of this policy? Who stands to gain? One might say the CBN Governor has to be careful not to be seen to have acted out a new form of impunity when the public takes his antecedence into account as the former MD/CEO of Zenith Bank, the largest FX trader in Nigeria.

Strangely at about the same time, the Nigeria Customs Service also made a move. It announced a revision to its tariffs and a notable item came off the import prohibition list – furniture. On the CBN list of items to be starved of FX are the raw materials for making furniture in Nigeria and on the Customs’s list, importation of furniture is now allowed at a 35% import duty. The combined policy changes tell the local manufacturer of furniture that it is time to stop producing locally, lay off all factory workers and start importing. On the face of it, it might seem like an unfortunate case of policy inconsistencies but further research tells a more interesting story.

A new economic order seems to be emerging in Nigeria by fiat: almost by a new form of impunity; by means shrouded from the gaze of the public but one which allows only those in the know place their bets on a new, emerging configuration of power prior to the appointment of ministers and other political appointees?

There is a man from Katsina simply known as Nigeria’s most notorious smuggler. He was a close associate of President Yar’Adua, a major financier of the PDP whose business model included clearing and forwarding goods no one else knew how to get into Nigeria. The story goes that President Buhari threw down the gauntlet stating there would be no place for smugglers in his administration and this character has now opened a major furniture sales company in Abuja. Prior to this time, in clearing and forwarding circles it is well established that policies in Customs are not made without his input. His friends and allies are helping with his rehabilitation, as he is also a major investor in oil and gas in Niger Republic and increasing his investments at home as well.

The rice, cement and so on exclusion from “more affordable FX” will increase the barriers to entry for anyone else and, contrary to the straw man constructed by the CBN, make Nigeria’s economy less, not more, competitive. This move will increase FX demand for any and everything and not reduce it as they, in the words of Bismark Rewane of Financial Derivatives, are signaling to world that Nigeria has an FX problem which could lead to delayed investments or outright cancellations.

Is this a very clever attempt at pulling the wool over our eyes and masking the real intentions here? A new economic order seems to be emerging in Nigeria by fiat: almost by a new form of impunity; by means shrouded from the gaze of the public but one which allows only those in the know place their bets on a new, emerging configuration of power prior to the appointment of ministers and other political appointees. Is this the private sector equivalent of the deft maneuver we witnessed in the National Assembly?

Soji Apampa, the co-founder of The Integrity Organisation, can be reached at Twitter: @sojapa, and email: [email protected]

 

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