By Odunewu Segun
A financial expert has admitted that a complete currency float was capable of unifying rates and reducing round tripping and speculative activities but added that toeing such a path would be suicidal for an import-dependent economy like Nigeria.
Dr Uche Uwaleke, the Head of Banking and Finance Department, Nasarawa State University made the observation in an interview with National Daily in Lagos.
He said it is only when the supply of forex is guaranteed from diversified sources that the issue of market-determined value of the naira can be tabled for consideration.
The financial expert said that the current depreciation of the naira could be checked by reversing the current downward trend in the value of the naira, and that well-coordinated fiscal policies should be deployed to pursue import substitution and enhance the competitiveness of local production with a view to curtailing forex demand.
According to him, new foreign exchange allocation method of the CBN was aimed at narrowing the wide gap between the official and parallel market rates. He said the new method would only narrow the wide gap between the CBN and the parallel market rates and not to halt the slide in the value of the naira.
The university teacher said the recent measure would also improve access to foreign exchange for Personal Travel Allowance (PTA) and payment of school fees abroad.
“I am sure that the CBN is under no illusion that the tiered exchange rates, which this forex policy has brought about, will halt the slide in the value of the naira.’’
The Central Bank on February 20 released new policy actions to address the challenges in the foreign exchange market. In the new policy, the apex bank said it would provide direct funding to banks to meet the needs of Nigerians for personal and business travel, medical needs and school fees effective immediately.
The CBN said it expected such retail transactions to be settled at a “rate not exceeding 20 per cent above the interbank market rate,” which currently stands at N305.50k per dollar.
The apex bank said it took the step in continuation of efforts to increase availability of foreign exchange to ease the difficulties encountered by Nigerians in obtaining funds for transactions.