Nigeria needs flexible exchange regime, not devaluation, say experts

Amid controversy over government’s decision to devalue the Naira and the Central Bank of Nigeria (CBN’s) denial of such moves, experts have weighed in, calling for a flexible exchange rate policy as against outright devaluation.

The experts agreed that Nigeria’s forex market cannot be left to continue with the current trajectory, as there was need to close the gap between the official and parallel markets.

They argued, however, that mounting pressure on the Naira has pushed government to a dead end, but that opting for outright devaluation at the moment would be detrimental for the economy, as the country would gain nothing from such move because of its low export base.

The President of Association of Bureau de Change of Nigeria, Aminu Gwadabe, told The Guardian yesterday that government has no other option than to return to the two official exchange code, which remains the best policy in the light of dwindling reserves.

He said, “It’s been very challenging for government as a result of continuous scarcity of the Dollar. The pressure from the International Monetary Fund (IMF), the World Bank and foreign investors, who believe that the gap between black and official markets is too much, has also not mellowed. The price of oil continues to fall without improvement. Government has no choice than to go back to two official exchange Codes, which remains the best option. In the last two or three days, the Naira has lost N40 to a Dollar”

Gwadabe urged the government to fast-track the implementation of the agreement on swap of the Naira with Yuan, noting that since the agreement demand for the Chinese currency has soared within and outside the country.

Opeyemi Agbaje, an economic analyst, said devaluation is the best way to go for the country, stressing that the country wasn’t proactive in preempting trends in the forex market.