LAGOS (Sundiata Post) – The Lagos Chamber of Commerce and Industry (LCCI) has canvassed for equal allocation of Foreign Exchange (FX) to all sectors of the economy.
The director-general of the chamber, Mr Muda Yusuf said that the allocation of 60 per cent foreign exchange to the manufacturing sector would lead to the potential crowding out of other sectors in the forex market.
According to him, sectors outside the manufacturing sector account for over 85 per cent of the country’s GDP and jobs in the economy.
“They all have varying import contents in their operations. Therefore, if a minimum of 60 per cent of all forex allocation goes to manufacturing for raw materials and machineries, what happens to other sectors? Currently petroleum products imports are priority and could take another 25 per cent of foreign exchange. This implies that the rest of the sectors would settle for the balance of 15 per cent.”
He described this as one of the policy inconsistencies of the government making it difficult to regain the confidence of investors, saying this is clearly not a sustainable framework.
Yusuf noted that it is important to recognize the interdependence of sectors and the integrated nature of the economy, saying “All sectors complement one another for the economy to function properly. This is not to diminish the critical importance of the manufacturing in the economy, but we should realise that other sectors, ICT, Telecoms, real estate, Entertainment, Agriculture, distributive trade, Health services, education services, among others play important roles as well.”
He pointed out that the sustainability of the forex sectoral allocation policy is in doubt and this could only create more confusion in the foreign exchange market.
The director-general also added that the CBN circular did not indicate any HS Code to properly define what would qualify as raw materials and machinery, saying “The first concern will be that of definition. The result of this will be discretionary interpretation by the banks as what qualifies as raw materials and machinery.”
He however called for fiscal policy measures which are better suited to address sectoral imbalances than monetary policy; such policy tools include import tariffs, taxation and other incentives.
He said that there is need to upscale infrastructure investments very urgently as these are the more effective ways to fix the structural problems of the economy than monetary policy.
