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Why Nigeria should avoid complete floatation of naira – CPPE

Naira gains for second straight day at official FX market

The Centre for Promotion of Private Enterprise (CPPE) says Nigeria should avoid a complete floatation of the naira in order to avert currency volatility amid intense speculative pressures.

Muda Yusuf, the chief executive officer, CPPE, stated this in a paper titled: ‘Building a resilient economy in an emerging administration: The role of stakeholders”, he recently delivered at a workshop in Ijebu Ode, Ogun State.

According to him, while the recent foreign exchange policy reform is laudable to unlock inflows of capital into the economy, it also has a downside, especially the further depreciation of the currency.

“Removal of impediments to market mechanisms in the allocation of forex will boost inflows from Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), Export Proceeds and Diaspora remittances.

“However, we should avoid a complete floatation of the naira to avoid currency volatility amid intense speculative pressures,” he said.

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According to Yusuf, a former director-general of the Lagos Chamber of Commerce and Industry (LCCI), in creating a resilient economy, there is a need to prioritise macroeconomic stability with emphasis on moderating inflationary pressures, stabilising the exchange rate and boosting economic growth.

For him, this would require a good mix of fiscal and monetary policies, with fiscal deficit kept within statutory thresholds.

Stating that fiscal consolidation is critical for economic resilience, he highlighted the need for tax reform to ensure efficiency in tax administration, reduce tax evasion and tax avoidance and eliminate multiple taxation.

He also noted the need to unlock more income from revenue-generating agencies through enhanced efficiency of their operations.

According to his paper, President Bola Tinubu-led administration should establish quality economic governance consistent with tested economic principles and empirical evidence.

“This should also be contextualised within socio-economic peculiarities. No economic management model should be adopted in absolute terms. Policies must be reviewed periodically in the light of prevailing circumstances.

“This is not to suggest an endorsement of policy summersault which is very disruptive to the economy. This is critical from the onset for positive signaling and the deepening of investors’ confidence,” it said.

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The paper also showed that a sustained oil and gas sector reform is critical for sustaining the resilience of the Nigerian economy.

It stated that the government should demonstrate unmistakable commitment to the implementation of the Petroleum Industry Act (PIA) to attract more investment into the oil and gas sector.

The event was organised by the Labour Writers Association of Nigeria (LAWAN) and attracted stakeholders from the media, labour, and organised private sector.