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CBN’s plans to end multiple rates to weaken naira, hike inflation, says Moody’s

There are strong chances for the Nigerian economy to reverse back to weaker naira regime, higher fuel price and hyper inflationary regime should the Central Bank of Nigeria (CBN) put paid to the pressure of International Monetary Fund and even the parallel forex market operators to merge rates.

This was revealed by the International credit rating agency, Moody’s Investors Service in its recent report, saying until at least early 2020, any such move will lead to serious shocks in the economy.

Industry analysts say the best bet for the government in merging the rates would be to wait until moribund refineries are back to life and Dangote refinery is on stream, arguing that during such regime, it would be difficult for any rate merging policy to hobble the economy as the major consumer of forex which is petroleum imports is out of the way.

According to Moody’s, taking the decision at this time, will not impact the official naira rate.

Substantiating the idea in an interview in Lagos, Aurelien Mali, a sovereign analyst with Moody’s, said “If the government merges the exchange rates, “they won’t be able to provide discounted dollars to oil marketers.

“It means that either they have to increase pump prices or give subsidies to marketers, which would impact public finances. Neither option is credible at the moment.”

He traced the problem from the tight corner Nigeria has found itself due to upon being a member of the Organisation of petroleum Exporting Countries (OPEC) and Africa’s biggest oil producer; it still imports nearly all its fuel because of the sorry state of four national refineries.