Peoples Democratic Party (PDP) chieftain and former Delta state gubernatorial aspirant, Chief Sunny Onuesoke, has warned that the new foreign exchange measures introduced by the Central Bank of Nigeria (CBN) will rather crash the Naira further instead of salvaging it.
Onuesoke, who spoke to journalists at Asaba International Airport, Asaba, Delta state while returning from a financial meeting in Lagos, said the problem with the new exchange rate policy is that it is designed for the elites with government connections.
He said that the government does not truly have the foreign reserve, or the economic prudence to realistically defend the Naira, so its half measures are making a bad situation worse by creating two exchange rates.
According to him, “One is for highly placed Nigerians, government lackeys and the other for everyone else. The official rate is not backed by any known economic principles. It is simply arbitrarily chosen
“This rate cannot be sustained and made accessible to everyone who needs foreign exchange. Because of this, there is a flow over to the so called black market, where the rate is determined by market principles of demand and supply.”
The PDP chieftain warned that the racketeers might hijack the CBN’s gesture and that it was not sustainable, just as he observed that those applying for Foreign Exchange for PTA might be doing so for the arbitrage.
He observed, “With little regard to the precarious inflow of foreign exchange, money deposit bank (MDBs) advertise availability of foreign currency for would-be travellers and bureau de change (BDCs) get enhanced supply of foreign currency at below Nigerian Autonomous Foreign Exchange (NAFEX) rate. The hope is to lower the expectation of Naira depreciation, but it does not work out that way.”
He noted that the CBN would run out of firepower, after which the slide of the local currency would continue.
“Those who otherwise will not travel do and those who have full information enter the market for the purpose of arbitrage because they know that the policy will not last. The supply splurge is from the CBN. When it exhausts its fire power, the slide in the exchange rate will resume,” he noted.
He advised that if the government stop subsidising the elites, the value of the Naira would initially plummet until the market finally stabilizes and the free market forces take over, adding that the rise and fall of the naira would be determined by how well or how bad the economy is being managed.
“The exchange rate would be more stable and organizations and individuals can plan ahead. We can then begin to produce most of what we consume, which would further enhance the value of the naira.
“All these may take a while to achieve, but to do nothing would be catastrophic. The government can begin by banning foreign education or medical tourism, invest in our universities and hospitals, bring them to world standards and they would not only be patronized by Nigerians alone but by other nationals.
“Our universities trained many Africans from all over Africa, it can still be done. It’s a shame that we have deteriorated to such a shameful level,” he stated.
Last week, both the World Bank and the International Monetary Fund (IMF) sought full harmonisation of the different exchange, saying it was a necessary action point to achieve stability. Though they commended the adoption of NAFEX for official transactions, they noted that a broader reform would be required to a market that supports growth.
Recall that the Central Bank had, last month, discarded the previous official rate for NAFEX, otherwise known as investors’ and exporters’ (I&E) window, on which the monetary authority had promised to pursue rate harmonisation
