The Centre for the Promotion of Private Enterprise has stated that the distortions inherent in the foreign exchange market will persist in 2022.
This is according to the Economic Review for 2021 and Agenda for 2022 report of the Centre for the Promotion of Private Enterprise [CPPE] 2022, signed by the centre’s Chief Executive Officer, Dr Muda Yusuf.
The report stated that the challenge of forex to investors in the outgoing year was multidimensional.
What the report is saying
According to the report, the FX challenge will be a key issue for investors in 2021. The following are the dimensions of this dilemma:
i. The sharp depreciation of the currency depreciation over the last one year.
ii. The liquidity crisis in the foreign exchange market, which manifests in the acute shortage of foreign exchange in the official window.
iii. Volatility of the exchange rate which creates considerable uncertainty and unpredictability for investors.
The report said “Monetary and foreign exchange policy rigidities may also pose a risk to the growth outlook as there are no indications of any significant shift in monetary and foreign exchange policy stance in the near term.
“Consequently, the distortions inherent in the foreign exchange market will persist in 2022. The constraining effect of the high Cash Reserve Requirement [CRR] on financial intermediation would also persist in 2022 with a dampening effect on the growth outlook.”
The report stated that investors will have to grapple with the barriers to international trade experienced in 2021. “These are problems relating to the Lagos ports, the traffic gridlock, port congestion, bureaucratic documentation processes, extortions and the prohibitive charges by terminal operators and shipping companies which are unlikely to abate in 2022. Investors would have to grapple with these constraints in 2022,” it said.