Forex: FG, economists endorse CBN policy

 

PRESIDENT Muhammadu Buhari and two leading Ni­gerian economists have en­dorsed the central bank’s for­eign exchange management policy. This is coming on the heels of strong criticism of the CBN forex policy of capital controls as against Naira de­valuation.
The President noted dur­ing the just-concluded Presi­dential media chat that there was no strong conviction on the need to devalue the Naira and therefore, would not sup­port devaluation, a position which is in alignment with the stance of the Central Bank of Nigeria. President Buhari pointed out that he needs to be convinced that there is need for the country to devalue the Naira, while stressing that Ni­geria, as a nation, has foreign exchange policy priorities, which is to provide money to fund the projects which the CBN has highlighted and not to waste the nation’s resources on those who want hard cur­rency to import textile and toothpick.
In the same vein, Manag­ing Director/ Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bis­marck Rewane also supports the CBN’s flexible managed floating rate, which is a band within which the exchange rate will move. However, he noted the exchange rate im­provement depends largely on improvements in Nigeria’s productive capacity through improved oil prices, produc­tion and exports. These con­ditions are expected to create positive appreciation of the value of the Naira against other currencies.
He warned that if these pa­rameters depreciate, the naira will also depreciate. Rewane, also expressed strong oppo­sition to naira devaluation, stating that what Nigeria is witnessing is adjustment of the rate in response to the set parameters.
He revealed that the econ­omy has depreciated sharply, therefore, downward adjust­ment of the naira is inevi­table, “it is not what we wish to have, but that it is what we have to do. What the CBN has been doing is to manage the circumstances within the lim­ited resources that we have, there has been rationing and other monetary control mea­sures, all these are indications that what is available is not what is required, and therefore it is important to manage it in an orderly manner.”
He also clarified the differ­ence between exchange rate uncertainty and exchange rate risk. He stated that risk and uncertainty are not the same thing. “Risk is the probabil­ity that something negative will happen, and uncertainty means you do not know what is going to happen. So in 2016, Nigeria will be moving from uncertainty to an environment of low moderate risk.”
Another leading economist, Dr. Biodun Adedipe, has also stated that Nigeria’s economic problem is not the naira dollar exchange rate.
According to him, the prob­lem is the supply problem. The people wants to get goods and Nigeria is not produc­ing enough to meet local de­mand. Therefore, the people will have to import and that means pressure on the naira and invariably, the naira dollar exchange rate.
“Therefore, the Central Bank of Nigeria, in my own view, has performed excel­lently well by placing capital control on foreign exchange. This, however, should have a set period to encourage all stakeholders to support the initiative. “In respect of capital controls, I am firmly in support of the Central Bank of Nigeria. This is the logic, and we have a reference in history. What Malaysia did in 1997, when they found themselves in the situation, Nigeria has found itself doing the same today.”