Ex-CBN head urges end to the Multiple Forex Windows

The Professor of Economics also used the occasion to highlight a number of steps needed to be taken by the Federal Government to get the country out of the current biting economic challenges and get back on the path of growth.

“With regards to exchange rate, I can see quite some changes in the last few weeks. I think some steps are beginning to be taken, but it is still quite a long way to go to get to a stable and predictable level that eliminates the premium among the multiplicity of exchange rates.

“Nigeria must get out of multiple exchange rates and we must eliminate the premium, get it back on track at a competitive exchange rate regime. The uncertainty that is created by that is so enormous; and with the oil price rising and with the increase in oil earnings, this is the time to take bold steps and do the needful.”

On how policymakers can eliminate the multiple exchange rates and close the gap, Soludo said it was simple because the nation had done it before.

“…we have done it before and it is just going back to it. If it (the template) is not broken, why mend it? Get back and eliminate the multiple exchange rate regime, eliminate the premium, or at least significantly reduce it to not more than between three to maximum of five per cent premium between the parallel and official exchange rates.

On what government should do to get the economy out its slow growth, Soludo stated that “… on what it takes to do it, that is basically known. Get the public finance okay; I can tell you that with the momentum of what is going on in the rest of the world, by the end of this year, we should actually be having stocks of reserves in the range of about $50bn or $60bn.”

“And getting Nigeria structured and reengineered towards non-oil economy that again will require a lot more serious work. The recession is not the issue. We will get out of it in spite of government policy.

“I think this is a time Nigeria should actually be making hard decisions to transit away from an oil revenue economy. And that’s the serious work.”

Soludo also commended steps taken by the CBN in the last few weeks to restructure the foreign exchange market, but stressed that there was still a long way to go to get the economic back on track.

Also speaking at the event, Mr. Bismarck Rewane, the Managing Director, Financial Derivatives Company Limited, stated that the nation’s Gross Domestic Product is projected to expand by 2.19 this year before settling at 7 per cent by 2020. He also noted this projection is predicated on the assumption that the country’s oil output will be sustained at 2.5 million barrels of oil per day.

“It also means we will increase the overall tax to GDP ratio, which is about five per cent now, to about 15 per cent, and the tax policy will be more efficient and the revenue will increase to about N350bn annually,” Rewane added.

Dr. Ayo Teriba, who was a panelist at the event, submitted that the Economic Recovery and Growth Plan of the Federal Government was triggered by the shocks occasioned by the recession and worsening of the inflation record.

“Nigeria’s economic crises broke out in the course of 2016. We also had foreign exchange crisis, which broke out also in 2016. Perhaps, we should have separated the crisis response from the plan. Crisis response calls for urgency. Mid last year, the currency was devalued. So, we needed the crisis response, we don’t have the luxury.

“In economic policy, there are lags. Lags are well understood. After recognising there is a response lags, what should now be fashioned is the response. There is an action lag. When you have a recession and devaluation, you want to do your best to shorten the lags. Yusuf emphasised the need for the Federal Government to anchor its growth plans on the private sector, emphasising the role of private investments in economic growth.

Other panellists at the event were the Director-General, Lagos Chamber of Commerce and Industries, Mr. Muda Yusuf; a former Deputy Governor, CBN, Dr. Obadiah Mailafia; and Partner, PwC, Mr. Taiwo Oyedele.

Ex-CBN head urges end to the Multiple Forex Windows

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