The fate of the naira no doubt hangs on the balance, what with the unprecedented fall of the local currency, which exchanged for N400 to the green back last week, a development, many financial and economic analysts argue does not bode well for the economy.
The poor fortunes of the naira may not stabilize anytime soon, but analysts contend that the immediate measure to the current situation is for the Central Bank of Nigeria (CBN) to relax some of its forex rules, otherwise the local currency would continue on a free fall.
In the view of Johnson Chukwu, CEO of Cowry Asset Management Limited, the country needs to build up demand for forex, which has shifted to the parallel market, making it the ruling market for importation of goods.
For Dr Ayo Teriba, a renowned economist, the fall in value of the naira is attributable to the inability of the country to attract Foreign Direct Investment (FDI) in critical infrastructural sectors. Much as he agreed the fall in oil prices contributed to the slide, he said Nigeria should have cushioned the effects by offering some of its shares in the wholly owned parastatals to foreign investors.
The poor fortunes of the naira may not stabilize anytime soon, but analysts contend that the immediate measure is for the CBN to relax some of its forex rules, otherwise the local currency would continue on a free fall.
Teriba who is Chief Executive Officer, Economic Associates, added that the many foreign trips of President Muhammadu Buhari should start focusing on how to convince the Diaspora Community to invest back home.
This, he said, will help to increase dollar supply and provide liquidity that will galvanise revival of the economy.”
The President Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, said government must consider strategic partnerships with focus groups, like his, to save the naira from further slide. He said all those involved in the supply market should be engaged against speculative activities in the sector.
Teriba added that the many foreign trips of President Muhammadu Buhari should start focusing on how to convince the Diaspora Community to invest back home.
He debunked insinuations that the activities of operators were responsible for the shortfall in dollar supply, saying the group has been identified as having just five per cent participation in the currency market.
The Director of Lagos Business School, Prof. Pat Utomi, believes high cost of governance and poor local productions are responsible for the woes of the national currency.
According to him, “It is simply a function of increasing local production and reducing costs of governance. You can’t be talking about reviving the naira when senators are planning to buy vehicles. Will buying those vehicles boost the economy?”
Utomi, a political economist noted that: “We have to spend only on the productive sector to galvanise the economy.”
It is simply a function of increasing local production and reducing costs of governance. You can’t be talking about reviving the naira when senators are planning to buy vehicles. Will buying those vehicles boost the economy
In the view of Prof. Sheriffdeen Tella, who is professor in the Economics Department of Olabisi Onabanjo University, Ago Iwoye, Ogun State, at the centre of the crisis bedeviling the naira is the issue of speculation by bureau de change operators and their cohorts in the banking sector.
In an interview with Ripples Nigeria, Tella who is the former Vice Chancellor of the Crescent University, holds the view and very strongly too that one best way to address the drift of the naira is for the CBN to change the colour of the two highest denominations of the local currency.
Devaluation not the answer
Tella is also averse to the devaluation of the naira, which according to him, will not change anything.
“It is more cumbersome when you devalue because when this happens it is almost impossible to revamp your currency. But when the currency depreciates as it is now once you allow market forces, it is more practical for the currency to regenerate.”
The million naira question, however, is whether or not CBN’s policy control measures can effectively reduce dollar demand pressure and stablise or indeed improve the Naira exchange rate?
Like Tella, renowned economist, Mr. Henry Boyo also does not want the Federal Government to contemplate devaluation of the naira, stressing that a 50 per cent fall in value would severely deplete all naira income values and induce panic among naira income holders.
“Sadly, such response will simply instigate more dollar demand in the open market”, he argued.
Speaking further, Boyo said: “The million naira question, however, is whether or not CBN’s policy control measures can effectively reduce dollar demand pressure and stabilise or indeed improve the Naira exchange rate?
“Nonetheless, in his defence of the ban of almost 3000 Bureau de Change from official forex allocations, Emefiele, expressed grave concern that BDC operators had abandoned the original objective to serve retail end users who need $5000 or less.”
It is not clear how much tax was generated from these mega transactions, but one thing is for sure, the naira is fast sinking, and needs rescuing. The question now is how the Buhari administration intends to go about it.