CBN, IMF, experts disagree on multiple rates’ claims

The officials of the Central Bank of Nigeria (CBN), the International Monetary Fund (IMF) and financial experts, in Lagos, yesterday, differed on the controversial issue of multiple exchange rates and its implications for the economy.

The Senior Special Assistant to CBN Governor, Emmanuel Ukeje, said the development has severally been clarified, except that people have chosen to go with misconceptions.He the nation’s apex bank is not practicing multiple exchange rates, but multiple windows due to the country’s peculiar situation.

Making the clarification at the Special Policy Dialogue Colloquium, entitled: “Policy Change – The Enabler of Sustainable Growth”, organised by the Financial Derivatives Company, he said that those rates at N345/$ are forward rates, not spot rates, which when delivered in six months period are equivalent to N360 per dollar at spot rates.

He said that such moves are arranged to take care of the various sectors that will naturally not be serviced by the banks and geared towards exchange rate convergence.Speaking on the bank’s development interventions, he said that the Act establishing CBN allowed it to participate in such projects to fill the gaps, adding that anytime the fiscal authority can take the responsibility fully, the apex bank would hands off.

Speaking at the event, the Senior Resident Representative and Mission Chief for the IMF, Nigeria, Amine Mati, had in his presentation, explained that although multiple currency practice globally are on the decline, Nigeria is presently in it, saying 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.”

According to him, government should capture the differential in its yearly budget, as a form of accountability and basis to discredit the tag of multiple exchange rate on the foreign exchange window.But the Director of Monetary Policy Department at CBN, Moses Tule, stated that International Monetary Fund (IMF), in 2012, agreed that countries can also use multiple currency practice in a situation of structural imbalance, which some advanced economies used for about 45 years.

“What is wrong now if we give preferential treatment to importers of oil, so that they deliver the oil at certain price and avoid transmitting extra cost into inflation?“We had shock on inflation in June 2016, driven by three key factors that are not monetary- change in oil price, electricity tariff and depreciation of currency.

“So, the multiple currency practice, if there is any here, is temporary measures meant to correct issues. If IMF is now saying that the practice is not good, because the global financial crisis is over, that is clapping with one hand,” he said.

For an economist, Ayo Teriba, the capital control in the form of 41 items not valid for official foreign exchange window is trying to suppress demand, because they did not see the problem as supply deficiency.The Managing Director/Chief Executive Officer of FDC, Bismarck J. Rewane, said: “Greater trade can trigger deep structural change by increasing production efficiency and spreading knowledge and technologies across countries.

“In this case, Nigeria needs complementary structural reforms that can boost efficiency in sectors where we have competitive advantage.“Unifying the exchange rate will impact the Nigerian economy more positively than the current multiple exchange rate regime does, which creates opportunity for arbitrage.”