An Abuja- based economic and development research organisation, Pol Eco Analytics, has cautioned the Central Bank of Nigeria (CBN) against policy somersaults in its bid to boost forex liquidity.

The organisation  observed that the CBN has again, re-introduced the Retail Dutch Auction System (RDAS), to conduct the sale of foreign exchange to end users after it was jettisoned by the apex bank.

In a press statement made available to the media houses yesterday in Abuja, the Lead Researcher and Policy Analyst, Pol Eco Analytics, Mr Olamilekan Adefolarin, said though Pol Eco Analytics is strongly in support of any genuine and proactive monetary policies that would strengthen the ailing naira at this point,  this is not the first time the dutch auction systems process is being implemented by CBN. 

He recalled that under Godwin Emiefele, the Retail Dutch Auction System (RDAS) was in use as against the Whole Sale Dutch System (WSDAS) that was implemented under Emir Sanusi Lamido Sanusi,.

"Significantly, the Whole Sale Dutch System allowed CBN to sell FX to banks alone, while on the other hand,  the Retail Dutch Auction System (RDAS) allowed  direct sales of forex to end users by CBN through the banks. 

" Unfortunately, the excuse given for dumping the Whole Sale Dutch System (WSDAS) for Retail Dutch Auction System (RDAS) was the dollarization of the Nigerian economy. Similarly, the CBN had deployed Inter Bank Settlement Allocation Rationale as mechanism to sell forex."

The Lead Researcher, Pol Eco Analyst expressed concerns  that over the last nine months, the apex bank has introduced different short to medium term strategies of fixing Nigeria’s forex challenges and Medium-to-Long Term Strategy focused on improving FX Inflows and stabilizing the Naira, as well as  interventions to reduce the challenges faced by diaspora remittance flows,  and forex from oil and gas  receipt flow into our External Foreign Reserve.

Others, he said, include; strengthening surveillance and technological capabilities to monitor cryptocurrency transactions, and while all FX transaction windows have been consolidated into the NAFEM platform, the CBN removed the exchange rate cap to enable International Money Transfer Operators' (IMTOs) participation, as well as revamping the Bureau de Change (BDC) segment.

"Without a doubt,  the CBN's current policies, despite promising long-term benefits,have their own challenges, reason being that the model fails to address the challenge of attracting adequate liquidity  sustainable for the Nigerian macroeconomic environment.

While acknowledging  the fact that current monetary reforms are a crucial measure to help overcome naira depreciation,  Pol Eco Analytics said  that to make a lasting difference in monetary policy impact in Nigeria, Cardoso should refrain  from policy experimentations  amid the various policy reforms targeted at a stable FX liquidity.

"Regrettably,  many Nigerians are yet to come to terms with the free float exchange rate regime of the CBN and questions are still being asked about the willing-buyer, willing-seller regime of the Investors and Exporters Window.

"Pol Eco Analytics strongly believe that
addressing  Naira’s volatility will not be achieved through policy experimentation but strategically tackling liquidity concerns."