FG orders Soludo to Clarify Forex Policy


August 16, 2007/Tribune



The Federal Executive Council (FEC) on Wednesday directed the Economic Management Team “to critically look at the Central Bank of Nigeria’s (CBN’s) new currency policy and advise council accordingly.”


This is with a view to making some amendments to the new policy. The council meeting, which was the third in the life of the administration of President Umaru Yar’Adua, saw the CBN being asked to liaise with the economic team, with the latter expected to clarify a few “technical issues” relating to the new policy.


Minister of Finance, Dr. Shamsudeen Usman, while speaking with State House correspondents after the meeting, confirmed that the council members were not consulted before the announcement of the new policy on Tuesday, while clarifying that the unilateral declaration was still within the powers of the apex bank.



He disclosed that President Yar’Adua only wanted a few technical issues clarified, though he did not say what those technical issues were about.



The minister added that the involvement of the economic management team in the review of the policy did not amount to an interference with the autonomy of the CBN. 


According to him, “the autonomy of the CBN is not in question. They acted within the law (establishing it). Whatever issue coming from the council is only advisory to the CBN. Even the economic management team is an advisory body. It is not in the constitution or the law of the land. Obviously, they didn’t come to the government to approve (the proposal).



“The CBN Act doesn’t allow it to get such approval before they act. They don’t require government approval for decisions on monetary policy. Monetary policy is within the preserve of the CBN.” 


He explained that the clarification sought by the council was normal, equating it with the clarification that had to follow the consolidation exercise involving banks, especially on the areas that could not be immediately comprehended by stakeholders in the banking industry. 


“It was only on a few technical issues that the President said should be sorted out with the economic management team,” he said.



He admitted that under the CBN Act 2007, the apex bank was not bound to brief any arm of the government, including the executive, before launching the strategic plan.



According to him, “the proposal launched by the CBN yesterday (Tuesday) is within the purview of the law establishing it. It is dealing with monetary issues. It is the prerogative of the CBN to take decisions on this issue. What the CBN did today is to brief the council. In line with that, they are to present same to the National Assembly. The CBN governor made it clear that if there are suggestions, they would be taken into consideration.”



Minister of Information and Communications, Mr. John Odey, had earlier told journalists: “What the CBN is doing is sensitising all the stakeholders in this regards.



In another development, reactions to the new currency management effort of the Central Bank of Nigeria (CBN) which was launched in

Abuja have started coming in.


An economist, Mr. Henry Boyo, called for the immediate revaluation of the naira to about N100 to $1 so that when the new currency regime takes off in August next year, the exchange rate would be N1 to $1.




The implication of this for the economy, according to him, would include more oil revenue for government which would enable it to do a lot of things without further increasing the price of petrol. He said the measure would also bring down the price of refined domestic petrol and make life easy for the citizenry.




By pegging the exchange rate of the naira at N1.25 to a dollar in a year\'s time, he said, the CBN was not taking into account the progress that the economy would have made as a result of more revenue for the governmernt.




He also said that it would be wrong for Nigerians to assume that at N1.25 to $1, the naira was almost at par in value with the dollar. He said what happened was that the zeros on the currency had been cancelled which he said had no impact on the economy or the purchasing power of Nigerians.




The Chief Executive Officer of Economic Associates, Dr. Ayo Teriba, described the new policy as \"the re-decimalising of the naira,” adding that this was the first step in making the naira a convertible currency.




Teriba said the policy was just for arithmetic simplification of the value of the naira when it is finally redenominated.




For the re-decimalising to be meaningful, he said there must be in place arrangements for coins in circulation.




Under the redecimalising, N100 is known as N1. The exchange rate of N125 to a dollar will now be written as N1.25 to $1. Teriba said this did not have any effect on the purchasing power of Nigerians.




The new policy on the naira enunciated by the Central Bank of Nigeria (CBN) on Wednesday will affect salaries and wages and cost of goods and services in the country.




Experts, who spoke with the Nigerian Tribune on the issue on Wednesday in


Abuja disclosed that what the CBN governor, Professor Chukwuma Soludo, did should be termed a revolution in the economy.


According to them, the new policy would affect the quantity of money earned or to be spent on goods and services.




A labour activist, Dayo Adewale, told the Nigerian Tribune that the new policy might cause unrest in the society if the policy was not properly explained to those earning salaries.




Going by the fact that the currencies in circulation would now move two digits to the left, Comrade Adewale said the implication was that those people earning N36,000 per month would now be earning N360.




If not properly explained, he said this might not go down well with the workers who are used to having large quantities of money.




Mallam Ismaila Umaru, a bureau de change operator in


Abuja, told the Nigerian Tribune that the situation would mean job losses to many of them as the margins might be too negligible to sustain them in the business.


A civil servant in the Federal Ministry of Commerce and Industry, Mr. Solomon Akintayo, disclosed that the move was a good development as it would make the craze to travel abroad at all costs unattractive.




According to him, with a stronger naira, there won’t be any need for people to look for dollars. He said market women, estate agents and landlords would have their earnings reduced by two digits to the left.




However, a financial consultant, Mr. Clement Asuquo, said there was no cause for alarm as the value of the fewer naira to be held in return was now about 100 per cent higher.




The Area Manager, FirstInland Bank, South West, Mr. Abiola Alli, said the foreign exchange policy meant that good things would begin to happen in the country.




Speaking with the Nigerian Tribune, Alli said the step would bring down the rate of inflation and the economy would grow as a result. He said the policy, which include making N20 the highest denomination, would cause the productive sector to grow and people who fritter money away would think twice.




The Chairman, Manufacturers Association of Nigeria (SouthWest), Chief Adeagbo Akinpade, said there was nothing to jubilate about over the foreign exchange policy as it would bring inflation.




He noted that all the money in circulation, when the policy comes into operation, would now be devaluable by 100 per cent but the rate of purchase would not be reduced by 100 per cent.




\"Will Coca cola which is N40 come down to 25 kobo when the policy comes into operation? Will transporters reduce the fare they charge by 100 per cent,” Chief Akinpade asked.




The announcement by the Central Bank of Nigeria governor, Professor Chukwuma Soludo, that the naira will now exchange for N1.25 to a dollar as from August next year has not made any serious impact in the parallel market as the naira sold for N127 to the dollar on Wednesday.




However, forex dealers at Sabo,


Ibadan, told the Nigerian Tribune that the naira went for N129 to a dollar on Tuesday before the policy announcement was made by the CBN governor.


According to a bureau de change operator in


Ibadan, Alhaji Nasiru Danbaba, “for now, the policy shift has not impacted on our business and we still buy and sell according to how much money is involved in the deal.”


He added that the development had been welcomed by every trader in the market. Mr. Aminu Hassan, a trader, said there was a general anticipation that the naira would continue to appreciate till next year. He said that the forces of demand and supply would determine to a great extent, what would happen at the exchange market.




Reacting to the foreign exchange policy, Senator Smart Adeyemi, representing Kogi West, lauded the policy, saying that it would help in stabilising the economy.




“The policy should be commended by all right-thinking Nigerians who want economic stability. It is a good development. It will help close the gap between the rich and the poor,” he said.




Senator Adeyemi said if the policy was implemented to the letter, the country would be better for it. He said, “the CBN and Federal Government should take a step further by compelling the rich people who have more than N10 million to contribute a small percentage of their wealth to the economy.


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