Osinbajo urges CBN to adopt forex policy that serves interests of Nigerians
Vice President Yemi Osinbajo on Monday persuaded the Central Bank of Nigeria (CBN) to employ foreign exchange policies that will be in the best interest of Nigerians.
In response to headlines from some major new outlets seemingly purporting that the Vice President Mr Yemi Osinbajo is promoting an alternative policy view than that of the President, we would like to clarify that his words referencing an artificially low exchange rate were without the benefit of proper context.
The Vice President stated that “As for the exchange rate, I think we need to move our rates to be as reflective of the market as possible. This, in my own respectful view, is the only way to improve supply,” Osinbajo said.
“We can’t get new dollars into the system, where the exchange rate is artificially low. And everyone knows by how much our reserves can grow. I’m convinced that the demand management strategy currently being adopted by the CBN needs a rethink, and that is my view.”
Currently, the naira is changing at N411 to $1 at the official side of the market, while the same goes for about N565 at the parallel market.
“There must be synergy between the fiscal and the monetary authority. We must be able to deal with the synergy, we must handle the synergy between the monetary authority, the CBN, and the fiscal side.
“Sometimes, it appears that there is competition… If you look at some of the interventions, you will find that those interventions are interventions that should be managed by ministries.
“The Ministry of Industry, Trade and Investment should handle MSMEs interventions, and we should know what the CBN is doing. In other words, if the CBN is intervening in the MSME sector, it should be with the full cooperation and consent of the ministry of industry.
“Sometimes you will get people who are benefiting more than once because we simply have no line of sight on what is going on, on one side.” he concluded.
In the view of the Vice President, the current almost 50% spread between the official rate and parallel market rate is only encouraging arbitrageurs and speculators to bet against the Naira. People who are able to secure dollars at the official rate are perversely incentivised to find ways to sell it at the parallel market rate to benefit from the current arbitrage opportunity to the detriment of ordinary Nigerians.
His words therefore were meant as an encouragement to the Central Bank to review its de facto exchange rate policy of demand management to promote confidence and liquidity in the system. Increased investor confidence will allow for enough dollar liquidity to prevent spikes in the official-parallel market spread as we are currently witnessing.
In this way, despite the unfortunate mischaracterisations, the Vice President is aligned with the President’s vision to shield hardworking Nigerians from forced devaluations caused by liquidity crunches as the administration continues to implement policy reforms aimed at encouraging agriculture, industrialisation, and economic diversification.