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‘The Current Rate Of Dollar To Naira Is A Bit Artificial’

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Akintola

Akintola

Do you agree with the view that the unstable rate of foreign exchange is caused by some cartel?
There is no doubt that the current rate of Dollar to Naira is artificial. However, there are some indicators of the forces of demand and supply; so it is not entirely artificial.

There is no doubt that the current rate of Dollar to Naira is artificial. However, there are some indicators of the forces of demand and supply; so it is not entirely artificial.

The decline in the price of crude oil globally created panic among the importers, knowing very well that our Dollars come mainly from oil. It was also at a time when stocks of goods have been depleted due to the Christmas season. There was need to restock and do business for the year.

Coincidentally, the Central Bank of Nigeria (CBN) came up with the list of items disqualified from its forex market. Included in it were school fees and medical tourism. It means people affected will have to go through the parallel market to get Dollars to meet their needs. This was also a time when schools were resuming abroad. The CBN also stopped supply of forex from the CBN to Bureau de Change.

All this raised fears that there was imminent crisis of forex in Nigeria. Most parents wanted to buy Dollars so that their children abroad would not be stranded, importers too. The parallel market took advantage of the situation and daily increased the exchange rate.

Suppliers in the parallel market also fiercely competed for the limited supply of Dollars based on the new policy of the CBN and that also affected the rate. Meanwhile, people with foreign currency also held on to them not knowing what the rates will eventually be. All these were responsible for the heavy devaluation in the market. Things are settling down now.

How has the crisis affected businesses and the economy generally?

Expectedly, prices are rising in response to the exchange rate. Some institutions have responded by rationalising staff in order to reduce costs, while others wait for the position of government before taking a decision.

From the statement of the President Buhari on no further devaluation of the Naira, there is cautious optimism and the forex market has reacted with the high rate in the parallel market coming down. What is not very sure is how the CBN will meet the future demands of forex by importers and other services. If this becomes a problem, the Naira will have to be devalued. It must also be mentioned that the high level of corruption in the country before now has put a lot of pressure on the exchange rate. Most of the stolen funds are exchanged into Dollars and taken abroad.

If the current anti-corruption efforts of the Federal Government succeeds, our forex needs will drop significantly. Apart from oil, Nigeria also gets between nine and 12 billion Dollars in remittances and this will help to stabilise the economy, while we work on alternative local products.

Do you think the development is healthy for the Nigerian economy?

The expansion of local production will create employment and on the long run give us a vibrant economy. Until now, we were creating jobs in foreign countries by importing.



1 Comment
  • nuelsymbol

    How are we sure ,they are really Bunkerers , as claimed by the Police ? Or mere one or two Cans for Generators and spare use for Transportation business, from controlled price Station ?