Multiple Exchange Rates Reducing Value Of Naira—-Moghalu

A former Deputy Governor of the Central Bank of Nigeria, Kingsley Moghalu, has advised the Federal Government and the Central Bank of Nigeria to abolish its multiple exchange rates to fix naira woes.

Moghalu made the call as the naira traded around N760 at the unofficial market which analysts believe is a fair pricing of the currency.

Nigeria runs a multiple exchange market- the Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX) where naira trades at N441.38 to the dollar.

At the parallel market, the currency has plunged to N760 per dollar as of Tuesday.

He said in a tweet on Tuesday: “A fixed exchange rate that overvalues the naira is artificial because it’s not backed by the value of our exports. It promotes an import economy and leads to dollar scarcity. The constant depreciation of the Naira in the parallel market therefore stokes inflation.

“@NigeriaGov and @cenbank should obsess less on maintaining an artificial value of our currency and focus on a truly productive economy that exports ever more value-added products.”

Moghalu also said the policy of frustrating import into the country is not ideal, adding that it creates room for smuggling.

According to him, when local manufacturing is incentivised, local goods will compete with the imported ones so that both the rich and poor can have alternative choices.

He said, “No need to ban imports. It doesn’t work and only creates smuggling.

“Just use higher tariff rates that make imports expensive, and create incentives for local manufacturers to be more competitive vis a vis imports from China etc. The rich can afford imported champagne.

“The average Nigerian can buy locally produced goods. A Naira that’s bought and sold at natural market prices will also attract massive amounts of foreign currency investment into our country.

“The combination of such investment and the dollars we earn from exports will eventually strengthen the Naira to its natural value. Multiple exchange rates must be abolished for the Naira to thrive.

“All this, of course, requires a truly independent and professional central bank. Glad leading presidential candidates @atiku @PeterObi and @officialABAT are all thinking about this matter. It’s fundamental for realigning the economy to create more wealth for Nigeria & Nigerians.”

The Nigerian Economic Summit Group, an economic think-tank had issued similar advise of scraping multiple foreign exchange markets with significant price differentials.