- The Association of Capital Market Academics of Nigeria (ACMAN) has said that the economic fundamentals required to support a Naira float are still weak, especially with sources of forex.
- ACMAN President, Professor Uche Uwaleke believes that the CBN should implement the unification of exchange rates in a way that does not cause massive distortions in the general price level.
- Uwaleke has also said that the unification of exchange rates should not be a one-step process but should be implemented over some time.
The Association of Capital Market Academics of Nigeria (ACMAN) has said the economic fundamentals required to support a Naira float are still weak, especially with sources of forex.
The ACMAN President, Professor Uche Uwaleke in an interview while reacting to the step taken by the new administration to unify the exchange rate.
Uwaleke said it was commendable for the Central Bank of Nigeria (CBN) to unify the country’s exchange rate.
He, however, cautioned against a sudden free float of the Naira.
- According to him, “the economic fundamentals required to support a Naira float are still very weak, especially with sources of forex.
- Let me say upfront that I support the unification of exchange rates, which makes for a more transparent forex market.
- “But I think that the CBN should implement that in a way that does not cause massive distortions in the general price level.
- “It is rather early to bank on sustainable capital inflows from foreign direct investments due, in part, to insecurity and the overall unconducive environment of doing business in Nigeria.
- “This sudden Naira devaluation may draw foreign portfolio investments, which is part of the reason the stock market is surging.
- “But we also know that portfolio investments are hot money and do not represent a sustainable source of forex inflows,” he said.
Uwaleke said that the unification of exchange rates should not be a one-step process but should be implemented over some time, however short it may be.
According to him, empirical evidence suggests that reforms are more successful when they are sequenced and implemented in phases.
- “This is against the backdrop of the oil subsidy removal, which, taken together, can result in galloping inflation and rising poverty levels.
- “So, while fiscal and monetary policy reforms are welcome, absolute care should be taken to strike the right balance and minimize their unintended consequences,” he said.
What you should know: On Wednesday, June 14, 2023, Nairametrics reported that the Central Bank of Nigeria (CBN) has directed Deposit Money Banks (DMBs) to eliminate the rate cap on the Nigerian naira at the Investors’ and Exporters’ (I&E) Window of the foreign exchange market.
This move aims to facilitate a free-floating system for the national currency, enabling it to fluctuate freely against the United States dollar and other major global currencies. Analysts claim that it follows closely on the heels of President Bola Tinubu’s commitment to unify Nigeria’s various exchange rates.
As of Wednesday evening, banks were offering Naira at N755 to the dollar while in the streets it hovered between N750 and N754.
The attempt by Tinubu to brag that he increased national revenue the way he did in Lagos at the expense of people’s welfare will have catastrophic implications. All current government policies are pointing on that direction. The implication is the poverty in the land worsens. We have enough pain from the twin issues of subsidy removal and forex rate unification. To compound it with taxes and other duties would further worsen our daily lives and that is not what any government would like to see the implications. All the funds to be realized from.sll.these probes must be ploughed into the economy. Eg. If the $47b Emiefiele is reported to have stashed is applied to clearing some foreign de,bts and getting cancellation on others, the economy benefits as more credit lines can be opened for businesses. We need to bring down the cost renewable energy to serve as alternative that is reliable and affordable. There are so much that can be done to reduce the pain points..All that is desired are getting the right political will to select the people and to implement populist policies. All religions preach fairness as a major pillsr