CBN killing economic diversification with N305/dollar exchange rate—LCCI
The leadership of the most active trading ring, the Lagos Chamber of Commerce and Industry (LCCI) has raised a strong objection to the continued regime of official exchange rate of N305 to one United States dollar powered by the Central Bank of Nigeria (CBN).
In his lead argument, the Director-General of LCCI, Muda Yusuf, noted that the N305/dollar official rate is not only sending negative signals to investors, but “The current multiplicity of rates is inimical to sustainable economic diversification. The rate should be market-driven and the official rate of N305 to the dollar should be discontinued. It understates the naira equivalent of dollar revenue into the Federation Account.
“It gives a negative signal effect to investors. A market-driven rate would reduce the need and frequency of the CBN intervention in the forex market and inspire more confidence among the investing community. Current efforts at the unification of rates should be heightened.”
Even though fact checks by Business Hilights showed that the official rate hovers above the N305 most of the times, the operations of Bureau De Change, which are more handy raises more questions than answers as to the true exchange of the Nigerian naira in the faces of foreign investors and even indigenous players who exchange dollars to drive their businesses.
The scenario, according to financial experts has continued to create rooms for currency round tripping by exchange racketeers which has continued to put naira on a dangerous value point from year to year.
Continuing, Yusuf averred that the foreign exchange policy was a very important policy component which had profound impact on the economy and may continue to disallow the local currency any breathing space to rightly know it true value in the international fiscal market.
Analysts say the hot seat which the official exchange rate has put the naira is the major cause of momentary slump of the value that is usually triggered whenever money bags want to round trip the market even from the comfort of their home while the economy continues to receive the brunt.
Pundits say whenever the racketeers are on rampage; the apex bank is usually forced to make release of dollars which will further weaken the naira in the international market.
In his further submission, LCCI chief stressed that “A forex regime that perpetuates a rent economy would not serve the cause of economic advancement. It creates opportunities for corruption, resource misallocation, impedes the inflow of investment and creates transparency issues in the allocation of forex.”
“There are issues around the rates and multiplicity of taxes, levies and fees imposed on the investing community. The burden of taxation on investors is disproportionately high. It is a disincentive to investment and job creation endeavours,” Yusuf noted.
Before the recent outburst of LCCI, several development economists had advised the CBN to change the regime so as to lift the moribund value of naira, arguing that until the naira finds its true market value in a free-floating regime, it will continue to be tough in reconciling monetary policy regimes with fiscal permutations in the Nigerian economy.
