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A major source of Fx demand is illicit naira proceeds of corruption looking for a less diminishable store of value since real estate no longer holds that promise . As this class of politicians and their accomplices in and outside the public sector continue to plunder our commonwealth, they must seek ways of laundering and converting their naira reserves undetected. Dollar cash no longer holds that promise and many residential cash vaults hold more dollar cash than a lot of bank vaults.
The CBN must therefore address three policy planks to further support Fx rate convergence and achieve a realistic value of the naira. The first is that it must transform from being a supplier to being a trader in the market. It should actively take positions in NAFEX aimed at signalling market direction. It needs to establish Fx trade lines with international financial institutions allowing her greater access to liquidity and trade volumes.
Secondly, in order to improve her Fx supply base , the CBN needs to liberalise the capital importation regime and demonstrate to all actors that monies brought into the system the proper way are assured of remittances after necessary tax settlements have been accounted for. Linking Capital Importation and Export Proceeds to fiscal incentives enhances Fx supply in the medium to long term. Diaspora remittances incentives must go beyond the trading margins being offered.
Finally, we must criminalise the black market. Buying from or selling to the black market should be a basis for prosecution. PTAs, BTAs and all other in-country settlements should be disbursed using globally accepted stored value prepaid cards.
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