The ban of forex by the Central Bank of Nigeria(CBN) to Bureau De Change(BDC) operators is sending wrong signals to small business operators and the micro, small and medium enterprises(MSMEs) sector in the country.
This development is affecting about 95 per cent of small businesses as they are grappling to survive the inflation cost without no adequate buffers to suppress the shock.
Indeed, the ban of forex will threaten the performances and outlook of SME products, business community and operators of small businesses in the country who will be affected with the volatility of the weak macroeconomic fundamentals.
Reacting to the forex ban, the national president, Association of Small Business Owners of Nigeria, (ASBON), Dr. Femi Egbesola, said small businesses are the major bulk sector of the Nigerian economy which he said contributes 95 per cent to the total number of employment generation.
He said the small business owners are the largest employers of labour in the country which forms the bulk of employment streams, hence, they rely majorly on black markets and BDCs because the banks are not properly standardised enough to accommodate the capacity of small business owners in the country.
He explained that the bureaucratic bottlenecks, documentation processes and timing to get forex from the banks are beyond the reach of small business owners, adding that, the banks have not been duly standardised to the point of accommodating the documentation processes of small business owners.
He hinted that the ban on forex will cause inflation to spiral out of control, saying, the inflationary gap will erode the purchasing power of the buyers drastically while the patronage for goods will fall.
ASBON boss stated that the abrupt closure of forex policy to BDC operators is a good policy but added that, it will negatively impact on the economy, advising government to make forex available for a short-term while ensuring that it moves to liberalise the documentation processes of the BDCs against illicit forex inflows.
He stated that the importation of goods will be affected as forex won’t be made available for the importation of raw materials and payment of school fees for international students abroad.
Commenting on the issue, the immediate past president of National Association of Small Scale Industrialists, (NASSI), Mr. George Kuti, said the pressure on banks will be heavier now which implies that their ability to cope will solely depend on the mechanisms they had put in place before now to tackle it. By and large, the ban on Fx will curtail illicit businesses and inflows that the BDC operators have been benefiting from, he said.
Stressing that, if well managed, it will ultimately bring down the incessant hike in the naira dollar exchange rate in the medium term and long run, he said, this may lead to spike in the exchange rate because of pressure on the demand.
On the business side, he said, if the exchange rate comes down, the cost of input, raw materials and cost of production as well as the price of SME products will likely go down.