Nigeria's Exchange Rate Management Should Be Free From Political Interference

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Monday, August 02, 2021 / 10:54 AM / Ottoabasi Abasiekong for WebTV / Header Image Credit: WebTV

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Nigeria's exchange rate management should be executed without political interference and pressure, because it is part of the core mandate of the Central Bank (CBN).


Professor Akpan Ekpo an economist and public policy analyst made this point while providing his perspectives on  Nigeria's foreign exchange management and economic stability.


The econo0mist was responding to the recent decision of the CBN, to suspend the sale of forex exchange (FX) to the Bureau De Change operators (BDCs) over allegations of the violation of the agreed guidelines, thereby engaging in what the regulator called 'rent seeking'. Ekpo said the decision on FX sales to BDCs was long overdue, and would strengthen the monetary policy mandate of the CBN.


He hoped that the current foreign exchange policy of the CBN would be sustained without political interference. The scholar added that Central Banks in most African countries do not make provisions for FX sales to BDCs, and Nigeria must align with this reality.


Reviewing the country's exchange rate management strategy he said "exchange rate management is not as simple as people think, in a sense that the naira is not a convertible currency. Even when CBN says it has enough foreign exchange to cover imports it is provisional because it is hinged on crude oil proceeds".


On his support for the managed float approach to foreign exchange management, the economist stressed that it does not negate the markets, but  rather it watches the market and knows when to intervene.

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He added "demand and supply in the FX market is okay within textbook considerations, but when it comes to practical policy steps it has to be effectively managed for a stable economy".


The former member of the CBN's Monetary Policy Committee (MPC) acknowledged the fact that developed economies like the US, Japan and Germany have no issues with the value of their currencies because they are productive.


The past University of Uyo, Vice-Chancellor said Nigeria is not a productive economy at the moment, and this justifies the managed float FX regime. He stated that if the markets were allowed to determine the exchange rate, the naira would be totally useless and this would hurt the economy.


Akpo stressed the need for Nigeria to diversify its revenue earnings from crude oil and improve domestic productivity and production. According to him, Nigeria has to aggressively support Non-Oil sector activities to drive growth and boost revenue.


He laid emphasis on productivity as the way forward for Nigeria to achieve exchange rate stability because consumption-dependent economies are always exposed to shocks and instability.

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