A one time Governor of the Central Bank of Nigeria, Prof. Charles Soludo, says the apex bank’s official exchange rate of N306 to the dollar has become redundant, describing it as an instrument for rent seekers and arbitrary allocation of scarce foreign exchange in the country.
As a result, he said the CBN must achieve a unified market-determined exchange rate by eliminating the current multiple exchange rates as a matter of urgency.
Soludo spoke in a keynote address at the eight annual Pan-Africa Investor Conference organised by Renaissance Capital, an international investment bank, in Lagos on Wednesday.
“The general price level has already adjusted because that’s the primary price indicator in the market. The prices that people hear, i.e. the exchange rate that people talk about is the parallel market rate. Anybody who says it is irrelevant is not discussing Nigeria as an economy. The official one is like the time when you had the price control regime.
“Even those who had accessed forex at the official rate, when they are fixing their prices, they are fixing their prices in comparison with the imported ones, which are taking signals from the parallel market rate. So the general price level has adjusted there. The official exchange rate is redundant; it is just for rent and for arbitrary allocations.”
Soludo also advised the CBN to dump its current import substitution policy and adopt an export-oriented industrial strategy if it hoped to take Nigeria out of its present economic woes.
According to him, the country is implementing import substitution is a crude way and it must remove the ban placed on importers of some 41 items from accessing dollars at the official interbank foreign exchange window.
The former CBN governor said,
“Every regime comes to ban and the next unbans it. That is not the way to protect an economy. If you have a market-determined exchange rate regime and you do not want certain items, you put tariffs. The exchange rate plus the tariffs will make, for instance, the imported tomatoes uneconomical.
“That is where you deal with it on a sustainable basis. There is a need to think of a life beyond crude oil. We need not just import substitution; we need infrastructure and export-oriented industrialisation strategy. We cannot do that with this kind of crude inward look.”
Make Money Online in Nigeria... Click HERE To Start Now!