Nairametrics| It’s been exactly 248 days since the CBN launched the flexible exchange rate regime and since then the parallel market exchange rate has depreciated by about 33% against the dollar. Between January 2015 and June 2016 when the official exchange rate was held at N197, the exchange rate had depreciated by 41%, depreciating from N203 to about N345 at the black market. That was a period of 1 year six months compared to a depreciation of 33% in just over 7 months to February 2017. To date, the exchange rate has depreciated by about 60% from January year to date and 68% since the currency crisis began in 2014.
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Data from our parallel market archives reveal Nigerian exchange rate suffered a 29% depreciation against the dollar in 2015 while it was 45% depreciation against the dollar in 2016. The disparity between the official CBN and black market rates is at an all time high of N211/$1.
The CBN Governor, Godwin Emefiele introduced the new system on June 15, 2016 with unsuspecting Nigerians believing that the currency was now fully floated against the dollar and other major world currencies. Unfortunately, that has not been the case as the CBN has all but held the currency fixed at N305 while allowing about 8 other “official exchange rates” under its watch.
A look back at this policy decision suggest it has been nothing but a disaster. It has had incredible consequences for the economy at least from the standpoint of its implementation. One frequently used measure of the effectiveness of a country’s exchange rate policy is its disparity between the official and parallel market rates.
The National Executive Council last week pressed on the CBN Governor to change the forex policy of the CBN considering the wide disparity between the parallel and the black market. The CBN Governor responded by requesting for more time. There are strong indications that the exchange rate policy might be reviewed at the next monetary policy meeting.
The market is a wicked place for poor economy like ours.
The forces of demand and supply in the market are subjects of riggers in our banking institutions.
The demand is not fuelled by genuine need for forex but by speculators.
Even the so called manufacturers are profiteering from this debacle.
Our problem is having a President with little knowledge about economics and no care or concern for the populace with these decisions.
Whether we use flexible,semi-flexible or no-flexible rates, the only people who suffer are the majority of the citizens spread all over the states of the federation.
There should not be a big deal about fx issues:
let CBN in conjunction with banks set up a portal for daily fx request.
Let applicants submits unique codes on the passports and coys registration numbers with the application.
let the purpose for the request be stated either for visible or invisible transactions.
let applicants provide foreign account numbers where the fx can be TRANSFERRED into.
Let govt state clearly HEAVY SANCTIONS on defaulters and their banks where sharp practise is being observed.
let small requests of PTA and BTA be referred to the BDC operators.
Make it a law to banish operation of black hawkers of fx on our streets.
Emphasize adequate reporting for all players across broad and DISCOURAGE cash disbursements to fx requests.
We have more than enough regulations for fx processing. what is missing is enforcement of the laws. when banks see their juicy licenses at risk of being retrieved by the govt, they will comply.
Let’s stop deceiving ourselves, Nigeria is not operating under a flexible rate policy which we are fully aware of. This is just like a mother that locks her 20 year daughter in her house everyday and instructs that she must not have any friend. Then she allows her daughter to go out just for one month freely. The child has an experience of a lifetime being free and would not consider staying at home again. Her mother gets hold of her after a month and locks her again and starts claiming that she released her child before meaning she has given the child freedom. Meanwhile the child is back to her depressed state of loneliness.
Whatever is happening to the economy is as a result of inconsistency and the lack of the CBN to be able to stand by what it proposed, bowing to the pressure of its independent partner, the Executive. Until we experience a consistent devaluation of the naira, we are not progressing.