Kingsley Moghalu, a former deputy governor of the Central Bank of Nigeria, has encouraged the Federal Government and the Central Bank of Nigeria to do away with their several exchange rates in order to address the naira's problems.
Moghalu made the prediction as the naira was trading at about N760 on the black market, which economists consider to be a reasonable price for the currency.
The naira trades at N441.38 to the dollar in Nigeria's multiple exchange market, the Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX).
As of Tuesday, the currency has fallen to N760 per dollar on the black market.
A fixed exchange rate that overvalues the naira is artificial because it isn't supported by the value of our exports, he claimed in a tweet on Tuesday. It encourages an import-based economy and creates a shortage of dollars. Thus, inflation is fueled by the Naira's ongoing devaluation in the black market. Instead of obsessing about keeping our currency's false worth up, @NigeriaGov and @cenbank should concentrate on building a real economy that exports more and more goods with added value.
The approach of discouraging import into the nation, according to Moghalu, is not ideal because it leaves the possibility for smuggling.
He contends that when local production is encouraged, locally produced goods will compete with imported ones, giving both the wealthy and the poor more options.
No need to forbid imports, he replied. It is ineffective and just encourages smuggling. Simply utilize higher tariff rates to make imports more expensive and give local producers incentives to be more competitive with respect to imports from China and other countries. Imported champagne is only accessible to the wealthy. The typical Nigerian has access to locally-made products. A Naira that is purchased and traded at fair market rates will also draw a lot of foreign investment into our nation.
The Naira will eventually strengthen to its natural value thanks to this investment and the money we make from exports. The Naira needs to be devalued in order for it to prosper. Of course, all of this requires a central bank that is genuinely independent and competent. I'm glad that @atiku, @PeterObi, and @officialABAT, the major candidates for president, are all considering this issue. It is essential for realigning the economy in Nigeria and among Nigerians in order to increase wealth.
Similar recommendations to scrape multiple foreign exchange markets with significant price differences were made by the Nigerian Economic Summit Group, an economic think tank.
0 Comments