Economic experts and business leaders in the Nigeria’s private sector on Monday called for a unified exchange rate regime between the Central Bank of Nigeria (CBN) and the Nigerian open market to stabilise liquidity flow in the country.
This policy, they said will tame to the problems associated with multiple exchange rates.as being faced in the country.
They made the call at the Special Policy Dialogue Colloquium, entitled “Policy Change – The Enabler of Sustainable Growth” and organised by the Financial Derivatives Company in Lagos.
Financial Derivatives Company has been a reputable source of business information, economic data, research, stakeholders engagement discourse and analysis for West Africa.
The Managing Director/Chief Executive Officer of Financial Derivatives Company (FDC); Bismarck Rewane, in his opening remarks at the forum explained that formulating use of a single exchange rate for the Naira will put Nigeria at competitive advantage for the cross boarder open trade.
Rewane also made a strong case that unified exchange rate regime will jump start the nation’s economy stating that investors confidence will be restored, there will be improves Foreign Direct Investment (FDI) into the country and parity for stable trade and upscale economy trajectory.
Speaking further, he charged investors and stakeholders in the Nigeria micro economy to be abreast with African Continental Free Trade Agreement (AfCFTA) development and be ready for the cross boarder open trade, that was signed by the Nigerian Government on July 7, 2019.
He said, “Unifying the exchange rate will impact the Nigerian economy more positively than the current multiple exchange rate regime does, which creates opportunity for arbitrage.
“In this case, Nigeria needs complementary structural reforms that can boost efficiency in sectors where we have competitive advantage.”
“The (AfCFTA) is greater trade opportunity and in this case, Nigeria needs complementary structural reforms that can boost efficiency in sectors where we have competitive advantage.
“And i must also say that continued foreign exchange restrictions are among the factors dampening long-term foreign and domestic investment and keeping the economy reliant on volatile oil prices.”
Also, Senior Resident Representative and Mission Chief for the International Monetary Fund (IMF) Nigeria, Amine Mati, also at the forum, emphasised that exchange rate unification should be a policy-driven decision that the government must make.
“Multiple exchange rates have different implications across different countries in the world. We have analysed the situation in Sub Saharan Africa and have noticed that each country is able to succeed as a result of the policies that have been put in place to counter challenges.
“The IMF’s policy has been consistent on this issue, such that, we advise for the unification of exchange rates and the Central Bank of Nigeria and Economic Recovery and Growth Plan are already working in this direction to ensure that the country has a unified exchange rate.”
The Global Chief Economist at Renaissance Capital, Charles Robertson, cited Venezuela and Ghana as example as he advised government not to delay to formulate a unified exchange rate regime policy in the country.
“in the past, other countries that waited too long to reunify dual exchange rates, find out that the delay has resulted in the divergence between rates, becoming increasingly hard to manage.
“However i do not expect Nigeria to repeat that mistake as the elimination of exchange rate restrictions and multiple-currency practices would remove distortions and help economic diversification.”
“It is instructive and auspicious to leverage AfCFTA as it has created a window of opportunity for Nigeria to end the multiple exchange-rate system. This should help promote international commerce and lift barriers to investment flows. Finally, it would most likely deepen international trade relations and improve Nigeria’s chance of reaching its growth rate potential,” he added.
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