The Lagos Chamber of Commerce and Industry Director General, Dr. Muda Yussuf, has said that a flexible rate in the foreign exchange market is better for the economy than the managed float system that the Central Bank of Nigeria Governor, Godwin Emefiele has insisted is in use.
Yusuf told New National Star that a flexible or floating system was more credible and inspired confidence since it reflected the market realities. Yusuf said, “We prefer a flexible exchange rate regime because it is more credible, it inspires more confidence, it is more transparent. Because it eliminates rent-seeking activities in the foreign exchange market.”
Yusuf was of the opinion that the flexible rate system would increase foreign direct investments where the fixed exchange rate would discourage such inflows. “And it will also encourage a lot more inflows of foreign exchange into the economy. So a flexible rate I think is the best for the economy.
Managedfloat has too much uncertainty and it is unpredictable and that is not good for investment at all.” In response to the Monetary Policy Committee meeting in March, the LCCI in a communique asked that the committee pay more attention to the “deliberations to the foreign exchange policy” because it was bound to influence economic performance. The communique signed by Yusuf, said, “The forex policies are as important as liquidity management concerns.
Foreign exchange framework is key to the price stability mandate of the CBN. “The Chamber notes with concern the divergent positions of both fiscal and monetary authorities on the country’s foreign exchange policy framework. “It is important for the fiscal authorities, CBN and Economic Advisory Council to be on the same page as far as the country’s foreign exchange policy framework is concerned.”
Early last week, Reuters reported that the Vice President, Yemi Osinbajo, at a meeting at Chatham House, said payments made as part of Nigeria’s federal allocation would use the Nafex rate as opposed to the fixed CBN rate of N379. The Nafex rate is bound to market forces and shows market realities. Minister of Finance, Zainab Ahmed, was quoted by Bloomberg, to have stated that the country had now adopted a flexible foreign exchange rate. Emefiele however countered this stating that the country was using a managed-float regime. He told Bloomberg, “The country is deemed not to be practising a multiple currency regime as long as rates vary or range around a band that is not more than 2% below the nominal market rate.
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