Following the out come of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Tuesday in Abuja, which had voted to adopt a new flexible foreign exchange regime, industry experts have continued to react on its positive implications on the Nigerian economy, Daily Times investigations can confirm.
Speaking exclusively in a separate telephone conversation on Wednesday in Lagos, some financial stakeholders extolled the federal government on its recent decision to partially deregulate the downstream oil sector and the outcome of the just concluded MPC, most importantly its conclusion to adopt a flexible foreign exchange regime.
A Professor of Financial Economics at the University of Uyo, AkwaIbom State, Leo Ukpong, pointed out that the Nigerian economy was already in recession, not even heading towards it but believed that the introduction of a new forex regime by the economic team was a good policy in the right direction.
Professor Ukpong, explained that allowing the nation’s currency to float is a decision that was supposed to have been taken a long time ago, “because the nation do not have enough foreign currency to support exchange rate of N199 or N197 per dollar, if we are just looking at the dollar alone.”
He noted that for a country to continue to support its currency, that means such a country must have enough foreign currency to give to the people who need to import but unfortunately, Nigeria does not have that amount of the foreign currency to support it.
Ukpong further said that the easiest thing to do was to let the market determine the rate, adding that it will definitely create inflation, because the local currency will depreciate.
According to him, “unfortunately, in this case we have waited too long, if we were smart enough immediately when President Muhammodu Buhari came in, that was the opportunity we lost, if we had done this a long time ago the currency would have stabilised somewhere around N200 to N250 at most but look at it right now, we are talking about N360 may be by the time the market stabilizes, the floating rate is going to be close to N400.
“We actually destroyed the currency by waiting too long, and the same thing happened to gasoline prices. If we had taken off the subsidy at the beginning when the present administration came on board, fuel would have been around N100 to N120 which ordinarily would have been a free market but right now it has been pegged at N145 and if floated, it’s going to edge higher just because of the micro psychology.”
However, the MPC eventually did the right thing, now people who can outsource forex will use it judiciously for what they really need it for. “Because there are certain things we do not need in this country that we were buying from outside, things that we have the ability to produce locally.
“It is the right policy, and I support this particular policy of the CBN, because it falls into what I was expecting. Although, in the short term we will suffer but in the long run it will be better for all of us.
Indeed, the outcome of their meeting indicated that they have finally seen the power of free market, and they can now focus attention on how they can restructure the economy and not managing the forex price that is not sustainable.
Similarly, the Managing Director/CEO, Executive Officer, Highcap Securities Limited, a Lagos base stock broking firm, Mr. David Adorin, said,”They have acted professionally now, because the policy that have been delayed for over a year has finally come to pass. It is better late than never.”
He noted that the decision of the MPC and the CBN to come up with a flexible forex regime, couple with the partial deregulation of the downstream sector are basic policies to address the comatose state of the Nigerian economy from recession and or depression.
It would recall that we reported exclusively on Monday that financial analysts pointed that the challenges centered around foreign exchange rate of the naira, which MPC over the time had leaked on their professional duty, that the CBN and the nation’s economic team must create a single forex market to in order to stabilize the Nigerian economy.