The Central Bank of Nigeria (CBN) should float the naira to halt its further depreciation, the President of the Association of Bureaux Des Change (BDC) Operators of Nigeria (ABCON), Aminu Gwadabe, has warned.
Gwadabe, who made the appeal at the weekend in an interview with newsmen in Lagos, said the CBN should do all within its powers to undertake a sustained injection of the US dollar in the market in order to reverse the loss in the value of the naira at the parallel market.
The Naira has been on a free fall in recent weeks, depreciating to N430 per dollar at the official market, known as the Investors and Exporters forex window, and N710/$ at the parallel market popularly called the black market.
“It might sound counter-intuitive but the way out of the current frenzy is to abolish the official fixed exchange rate and allow the Naira to float. CBN should contemporaneously undertake a large-scale dollar intervention in the open market that can inspire confidence in the Naira and checkmate the current tailspin”.
“Once there is a significant positive movement, the market will react, and in all probability, spur an avalanche of panic-selling which will further buoy the Naira”, Gwadabe explained.
The financial expert said that the CBN could gradually buy back the dollars used in its intervention from the open market at a lower exchange rate for a decent profit. He argued that the next phase would be to strengthen the naira in the medium to long term, adding that both fiscal and monetary policies should be aligned to stimulate the tradable sector.
On CBN’s Monetary Policy Rate (MPR) at 13 percent, Gwadabe said that the adjusted rate would stifle growth. According to him, efforts targeted at reducing Inflation in an underperforming economy should focus on stimulating the supply side.
“The U.S. per capita GDP is around 66,000 dollars; ours is $1,500 in real terms, which underscores the need for a pro-supply side monetary policy”, he further said.
