• Removal of forex controls hurts Argentina’s economy, fuels protest
By Obinna Chima
As the Central Bank of Nigeria (CBN) continues with its demand management in the allocation of foreign exchange (forex) to end users in the economy, returns on forex utilisation published by commercial and merchant banks have shown that it allocated a total of $669,405,241 in April.
The sum compiled by THISDAY was $251,947 lower than the $921,352,549 sold to banks in March.
But the CBN remained unable to adequately meet the dollar demands of banks on behalf of their customers, as the central bank continued to refund banks for huge volumes of unfulfilled bids at the weekly forex auctions.
Forex demand in April covered importation requirements for fuel, spare parts, machinery and equipment, repatriation of capital, air ticket remittances, payments for foreign loans, school fees, personal and business travel allowances.
The Dangote Group, Nigerian Security Printing and Minting Plc (NSPM), Forte Oil Plc, Matrix Energy Limited, Dozzy Oil and Gas Limited were the major buyers of forex in April.
Just like the previous month, allocations for the payment of tuition fees overseas were the most numerous items. Some market commentators have queried the genuineness of the claims for the huge forex demand for school fees which has remained unabated.
During the month, FirstBank Nigeria Limited got the highest forex allocation totalling $74,673,190, but was lower than the $79,428,530 it got in March.
Guaranty Trust Bank Plc (GTBank) was allocated $67,146,192 to come in second in April, but its allocations were significantly lower than the $102,565,144 it got in March.
Stanbic IBTC, which was allocated $62,939,062 by the central bank in the month under review, held the third position. The amount it got in April was a 37 per cent reduction compared with the $100,590,015 it was allocated the previous month.
Similarly, Zenith Bank, which got a total of $62,137,299 from the central bank to occupy the fourth place, also had lower allocation in April, as against the $102,279,505 it got in March.
Diamond Bank Plc came in fifth with $60,083,783 it got from the central bank, lower than $77,911,934 it was allocated the previous month.
Coming in after Diamond Bank were Ecobank Nigeria Limited — $47,784,362; United Bank for Africa Plc — $47,372,870; First City Monument Bank Plc — $45,598,700; Standard Chartered Bank Nigeria Limited — $43,613,801; Access Bank Plc — $35,978,594 and Sterling Bank — $29,117,443.
Meanwhile, while Nigeria’s central bank has firmly held on to its decision not to loosen its forex controls and devalue the naira despite strong criticisms, the decision taken by Argentina to relax its forex policy is currently hurting the South American economy.
Argentina’s strongest unions brought thousands of people into the streets last Friday to protest against high inflation and job cuts in the biggest demonstrations against President Mauricio Macri since he took office in December.
Demonstrators waving blue and white Argentine flags flooded the main avenues of Buenos Aires, blocking traffic in a protest that brought together rival unions which put aside their individual differences to unite and protest Macri’s policies.
On December 16th, 2015, Alfonso Prat-Gay, the country’s finance minister named by Argentina’s new centre-right president Macri had announced that he would lift el cepo (forex restrictions) immediately, to allow the peso float freely.
Prat-Gay had said the “objective is to get the wheel turning again”, as he announced its removal.
But the uncontrolled devaluation of the peso has pushed inflation in the country which was 25 per cent then, much higher. Argentines continue to lose purchasing power to an inflation rate estimated at 30 per cent.
US-based TV network, ABC News, also reported that thousands of state employees have been fired since the decision was taken last December. The job cuts and the recent elimination of subsidies, which have led to sharp increases in everything from bus rides to light bills, have stoked unrest in a nation with a long tradition of providing generous state jobs and benefits.
Pro-business Macri has said measures are needed to revive Argentina’s stagnant economy, attract foreign investment and end economic distortions that have led to years of consistently high inflation.
“There’s a critical situation in Argentina and we’re not seeing a solution ahead,” said Pablo Micheli, leader of the Central Workers Union, which includes many public sector employees.
A recent report by an opposition think tank, the Argentine Centre for Economic Policy, said 141,542 workers lost their jobs between December and March, mostly in the private sector.
Layoffs have hit particularly hard in Argentina’s oil-rich south as companies try to stay afloat despite low oil prices. About 40,000 workers in the construction sector were laid off from January to March, Argentina’s Construction Workers Union said.
In Nigeria, with the backing of President Muhammadu Buhari, the CBN under Mr. Godwin Ifeanyi Emefiele has rejected calls to devalue the naira despite a plunge in oil prices that slashed revenue in Africa’s biggest oil producer.
The central bank has instead effectively banned imports of some goods restricted foreign currency supply and has pegged the naira at N197 N199 per dollar in the past year. It has also introduced other measures such as restrictions of the use of electronic payment cards abroad.
Emefiele recently described the current scarcity of forex confronting the country as good riddance, saying local production of various essential goods were being given top priority.