CBN Should Abolish Official Exchange Rate – BDC Operators
The Association of Bureaux Des Change Operators of Nigeria has urged the Central Bank of Nigeria to float the naira to halt its further depreciation.
The President of ABCON, Alhaji Aminu Gwadabe, made the appeal on Saturday in an interview with the News Agency of Nigeria in Lagos.
Gwadabe said that the CBN should do all within its powers to undertake a sustained injection of dollar in the market to reverse the loss in the value of the naira at the parallel market.
“It might sound counterintuitive 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 and further buoy the Naira,” Gwadabe said.
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 per cent, Gwadabe said that the adjusted rate would stifle growth.
He said efforts targeted at reducing Inflation in an underperforming economy should focus on stimulating the supply side.
“Increasing the MPR contracts the supply side, it is the wrong prescription.
“Let’s not copy the Americans who target inflation with FED rates to curb money supply; their factors of production have been fully mobilized, ours is at less than 20 per cent and requires stimulation of 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,” Gwadabe said.