Float Naira To Halt Its Depreciation, CBN Told

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The Central Bank of Nigeria (CBN) was on Saturday urged to float the Naira to halt its further depreciation.

Alhaji Aminu Gwadabe, the Association of Bureaux Des Change Operators of Nigeria (ABCON) president, made the appeal on Saturday while talking to the media in Lagos.

Gwadabe said that the CBN should do all within its powers to undertake a sustained injection of Dollar in the market to reverse the loss in the value of the naira at the parallel market.

Said Gwadabe: “It might sound counter intuitive but the way out of the current frenzy is to abolish the official fixed exchange rate and allow the Naira to float.

“CBN should contemporaneously undertake a large-scale Dollar intervention in the open market that can inspire confidence in the Naira and checkmate the current tailspin.

“Once there is a significant positive movement, the market will react and, in all probability, spur an avalanche of panic selling and further buoy the Naira”.

The financial expert said that the CBN could gradually buy back the Dollars used in its intervention from the open market at a lower exchange rate for a decent profit.

He argued that the next phase would be to strengthen the Naira in the medium to long-term, adding that both fiscal and monetary policies should be aligned to stimulate the tradable sector.

On CBN’s Monetary Policy Rate (MPR) at 13 per cent, Gwadabe said that the adjusted rate would stifle growth, pointing out that efforts targeted at reducing Inflation in an underperforming economy should focus on stimulating the supply side.

Noted he: “Increasing the MPR contracts the supply side, it is the wrong prescription.

“Let’s not copy the Americans who target inflation with FED rates to curb money supply; their factors of production have been fully mobilised, ours is at less than 20 per cent and requires stimulation of the supply side.

“Lowering the MPR to around five per cent looks more appropriate.

“The U.S. per capita GDP is around 66,000 dollars, ours is $1,500 in real terms which underscores the need for a pro supply side monetary policy”.

He said the CBN should reverse its mandate to banks to pay recipients of Diaspora remittances in Dollars.

Gwadabe held that most of the dollars end up under pillows outside of the mainstream banking system with no utility for capital mobilisation and imports.

Observed he: “It fuels currency substitution, it puts pressure on the Naira exchange rate and inflation and does not have a statutory backing unlike Domiciliary accounts, therefore, it is illegal”.

The ABCON boss said that Nigeria  had a long history of stifling the tradable sector (oil excluded), first through the Commodity Boards, the Arbitrage Kingpins, the bastion of corruption that straddled the export ecosphere whom Babangida dismembered in 1986.

Stated Gwadabe: “They bought low at the farm gates and sold high at the international export markets, much of the difference ended up in their private pockets.

“They impoverished the cocoa, groundnut, palm oil producers, etc. and eventually drove them out of business, not oil.

“Today, they have reincarnated as plethora of gatekeepers including the Nigerian Export Supervision Scheme at the ports exacting tolls from exporters.

“Poor infrastructure, power supply and generally unskilled labour further compound the weakness of our tradable sector.

“Any wonder why Ghana’s annual non-oil export is 13.1 billion dollars, while Nigeria’s is 1.3 billion dollars, We have a long way to go”.

He said that all the indices suggest that the Naira holds more of a downside potential than it does of an upside because the present monetary and fiscal authorities will continue to tether in the zone of docility.

The fall of the Naira, the ABCON boss said, was fueled majorly by the innate desire for self-preservation of some people and corporates who substitute a weaker currency for a stronger one.

He said that the paradigm had evolved over time to the current crescendo of panic-buying of forex, most of which would end up under pillows and Off shore.

He said that this phenomenon could not be adjudicated by the authorities.

Remarked he: “it’s typical consumer behaviour. Nigerians are sitting on an estimated 100 billion Dollars chest outside the country’s mainstream banking system.

“Today’s panic-buying causes currency to drop in value thereby inducing tomorrow’s panic-buying which in turn results in further decline of the value of the currency and so forth.

Said Gwadabe: “Panic-buying is driven more by psychology and less by economic fundamentals, so the solution has to be psychological too”.

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