LCCI Urges CBN to Intensify Forex Market Reforms to Strengthen Naira and Curb Inflation

The President of Lagos Chamber of Commerce and Industry (LCCI), Gabriel Idahosa, has urged the Central Bank of Nigeria (CBN) to continue its Foreign exchange market’s reform with intense discipline to further strengthen the Naira and curb inflationary pressure on the economy.

Idahosa made the call on Thursday during the LCCI’s quarterly press conference where he delivered an address on the state of the economy and urged the federal government to create an atmosphere that promotes export growth and competitiveness.  

He said: “We urge the CBN to continue with its forex market reforms with intense discipline, as the high exchange rate against the Naira is a major driver of the skyrocketing inflation rates,” adding that “the Naira firmed up due to some foreign exchange policy reforms undertaken by the CBN” before the end of the first quarter.  

He added that “in the last few days, the Naira rate of exchange with the Dollar improved, breaking some resistance and moving towards the level of N1000/Dollar or lower.

“The CBN needs to sustain its policy and regulatory reforms in the foreign exchange market, adopt policies that would attract more foreign exchange inflow into the economy as well as build market confidence in the performance of the FX market.”

Idahosa noted that before the reforms were initiated, the chamber noted that “the exchange rate of the Naira in the first quarter of 2024 depreciated in all foreign exchange market segments, crashing to an all-time low above the N1,500/Dollar mark in March. The depreciation was fundamentally driven by low supply to the market but speculative activities played a huge role in distorting the real value of the Naira.”

The LCCI commended the federal government’s swift actions in investigating the activities of some government institutions like the CBN and the Ministry of Humanitarian Affairs, which have sent strong signals to the world that it is serious in putting governance right.

“We only wish to urge the government to hasten the investigations and finalise the next actions towards restructuring the institutions concerned and entrenching sound corporate governance.

“We need strong institutions with strict adherence to international best practices in procurements, payments, decision making, discipline and communications,” the chamber said.

It also urged the federal government “to create an atmosphere that promotes export growth and competitiveness,” in order “to boost export earnings, raise domestic revenue, improve citizens welfare, and increase business productivity and competitiveness.”

It recommended that both monetary and fiscal authorities should focus on the factors driving the inflation rates by tackling the supply-side deficiencies instead of focusing too much attention on the demand-side management.

The LCCI also called on the government to continue expanding credit available at concessionary rates to MSMEs to support their operations and capital investments.

It argued that “the high lending rates make it challenging for businesses to access credit, especially for SMEs that are the backbone of the economy.’

It pointed out that “continuous increase in production costs lead to higher prices for goods and services, adversely affecting the competitiveness of Nigerian products in Africa and global markets respectively.

“We also recommend that reforms must include simplifying and harmonising trade procedures as well as addressing bottlenecks such as port logistics, congestion, and transportation costs.

“This is expected to position the country as the commercial centre of the region and a springboard into regional value chains.

Idahosa also commented on the recent hike in electricity tariff and expressed concern that the increase would make businesses to pay heavily for the services that they do not enjoy optimally.

He said: “It is a grave concern that with a higher cost of power, companies are still not having access to the service at the promised levels and quality.

“We call for an aggressive metering programme designed to achieve 100 percent coverage of electricity consumers. This guarantees liquidity for the distribution companies and gives more satisfaction to consumers with a feeling of paying for what they consume.

“Beyond the provision of infrastructure, we need to have a sound regulatory and policy environment to attract more investment into the power sector.”

 The chamber advised the government to create the enabling environment that would attract foreign investors to build renewable energy factories in Nigeria to upscale the country’s energy transition and reduce its dependence on the national hydro grid, which has continued to crash at close intervals in recent months.  

“We urge deep commitment to the Presidential Metering Initiatives’ target of installing about two million meters annually over the next five years.

“We expect the federal government to show more commitment to patronising local meter manufacturers to boost local content development and foster growth in the power sector. Since States now have control of their electricity markets, we expect them to launch similar metering initiatives,” it said.  

Dike Onwuamaeze

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