Nigerian Researchers have urged the governor of the Central Bank of Nigeria (CBN), Dr Yemi Cardoso to follow through with its latest monetary reforms policy, as against previous efforts that were abandoned half way.
In a press statement made available to LEADERSHIP over the weekend in Abuja, the researchers under the aegis of Pol Eco Analytics, a Nigerian-based Think Tank and Economic Research Organisation, said that was the option to address the naira crisis in the country.
In the signed statement, the Lead Researcher and Policy Analyst, Adefolarin Olamilekan, listed options available to the CBN governor, which he said, depends partly on the integration of the country’s monetary, fiscal and trade policies from a set goal target.
Another option, he noted, was for Cardoso to eliminate pressure from political economies that majorly abuse the foreign exchange sector for rent-seeking gains and dollarisation of the economy.
He said pressure from political economy has had net consequences on the macro and microeconomics
stability, bloated parallel market,
insecurity, discouraged exports, and eroded investors’ confidence in the economy.
Olamilekan said, ‘In the last three months, Nigerians have witnessed the various reforms the Central Bank of Nigeria (CBN) recently announced as measures to get the Naira strengthened for microeconomics stability and growth.
“These monetary reform policies are seen first hand as changes to the way the country’s foreign exchange market will work. Essentially to close the huge gap between the official and unofficial rates that caused severe shortages of foreign exchange.
“Another is found in how foreign currencies can be bought and sold at rates determined by the market, the floating avenue through the I&E Window.
“Also, the apex bank’s release of $700 million and $500 million, respectively, to settle the backlog of the claimed $7billion forex request, in addition to demanding that Deposit Money Banks (DMBs) sell their excess forex in their vault to Nigerians.
“Furthermore are the apex bank’s latest guidelines for participation in the International Money Transfer Operator (IMTOs) platform.”
The Lead Researcher observed that this signals the intention of the current CBN management to ensure naira regained it’s value and sanitise the nation’s FX market corridor.if it failed to act.
“However, we observe that there are three key problems that afflict Nigeria’s foreign exchange market leading to abysmal performance of the Naira.”
According to him, this includes, lack of transparency, followed by policy reversal, insider abuse, and political economic pressure cum rent seeking that characterises corny financial capitalists.
“This in our understanding of the FX market culminates into the technical problem of foreign exchange shortages and volatility as well as eventual depreciation of the Naira, while the liberalisation of the FX market, has not resulted in desired objectives of FX market harmonisation.”
Olamilekan said in retrospect, this is not the first time CBN will be liberalising the foreign exchange market as the first was in 1986; other efforts followed suit in 1995, 1999 and 2016 respectively, with lessons for the current CBN.
According to him, there is still evidence of multiple exchange rates in the system out to mar the various efforts of the CBN.
“Evidence of this is seen in the high increases in the number of black market currency dealers at airports, hotels and major streets across the country.
“Even though we have been told that a lot of FDIs and FPIs are in the waiting, if the impediments are not addressed, it could erode investors confidence, block capital inflow and foreign exchange would be scarce,” the Lead Researcher and Policy Analyst concluded.
