Economists from the University of Uyo and the financial experts have faulted the new exchange rate policy adopted by the Central Bank of Nigeria (CBN), saying it will not solve the insatiable demand for forex in the country.
They say by allowing Nigeria’s country to float for the exchange rate and its exchange rate decided by market forces, the CBN has assumed that the country’s economy is developed and productive in producing needed goods and services, adding that the “actual problem on the foreign market is a supply-side issue, which is insufficient to satisfy the demand.”
Edet Akpakpan, a professor of Economics, noted, “given the structure of the Nigerian economy, the current foreign exchange policy is not a viable option as it suits an industrialised economy of which Nigerian has yet to attain such a status.”
Akpakpan, a one-time special adviser in the presidency who spoke at a symposium organised by Department of Economics, University of Uyo, on ‘The management of Naira,’ said the continuous decline of the country’s currency had become a cause of concern.
“Floating will generate macro-economic instability as financial market participants stand to gain through market speculation, which will only stimulate portfolio investment. This will not generate wealth and employment because of macroeconomic uncertainty. This in turn has the tendency to generate further inflationary pressures, reducing the value of financial assets,’’ he said.
In his contribution, Akpan Hogan Ekpo, a professor of economics and one-time president of Nigerian Economic Society, said the floating regime based on the CBN stipulated guidelines had removed control and regulation of the market, adding that surveillance system would be weakened.
“This means that capital flows, particularly portfolio investment, which the new policy encourages will not be monitored thus encouraging free entry and exit of capital at whims and caprices of the investors,’’ he said.
Ekpo, who is the director-general of West African Institute for Finance and Economy (WAIFEM), called on the Federal Government to declare a national economic emergency to galvanise the entire country into action to save the economy.
He advised the CBN to review the new foreign exchange regime and opt for some form of a managed pegged system, saying it would be consistent with the structure of the Nigerian economy.
