Financial analysts and economists at Financial Derivatives Company Limited have commended the unified exchange rate regime, saying it is important for the growth of the nation’s economy.
According to them, a unified exchange rate impacts the economy positively more than the current multiple exchange rate regime, which creates opportunity for arbitrage and can trigger hyperinflation in the country.
“The number of countries maintaining multiple exchange rates has been declining since 1990s,” they said, arguing that the possibility of exchange rate convergence in Nigeria was now less
remote.
The analysts made this observation in an article, titled, “Floating Exchange Rate: A Road to Perdition,” published in the FDC Bi-monthly update of the Central Bank of
Nigeria.
The CBN Governor, Mr. Godwin Emefiele, had, in response to the presidential candidate of the Peoples Democratic Party, Alhaji Atiku Abubakar’s desire to float the naira, said that floating the naira would lead to economic perdition.
In November 2018, Atiku had said that if elected president, he would abolish the
current multiple exchange regime and instead, float the
naira.
In an interview with Africa Report, Atiku said, “I would prefer to float the naira because I believe that will bring about a
more stable exchange rate. Therefore, foreign investors are more likely to return to Nigeria and invest as much as possible. We have to create more incentives for foreign investment and relax conditionality, remove regulations as much as
possible.”
When asked about the possibility of this approach driving up inflation, he said, “There could be devaluation and there could be a lot of inflow of foreign currency into the country. The devaluation
that is likely to result can be balanced with the relatively huge sums of foreign currency that will be coming into the country.
“We had that situation prior to the departure of (former president) Goodluck Jonathan. At that time, we had a pile of foreign investment in the country, and there was stability of the naira. So people did not have to go to the central bank to look for foreign exchange because there was foreign exchange in the market and in the banks. So it could turn out to be a win-win
situation.”
