CBN must scrap multiple exchange rates, says Soludo

A former Governor of the Central Bank of Nigeria, Prof. Chukwuma Soludo, on Monday highlighted steps the Federal Government needed to return the country out of the biting economic challenges and get back on the path of growth.

Soludo said policymakers must get the country out of the current multiple exchange rates’ regime and reduce the wide spread between the official and parallel market exchange rates of the naira to a maximum of three to five per cent.

The currency currently has about five exchange rates, according to analysts.

The former Governor of the Central Bank of Nigeria, who was the Chairman of the Economic Discourse organised by the Institute of Chartered Accountants of Nigeria, spoke in Lagos while fielding questions from journalists shortly after the event.

He pointed out that policymakers were expected to be taking bold steps that would navigate the country away from crude oil dependency to a non-oil economy on the long run.

Soludo commended steps taken by the CBN in the last few weeks to restructure the foreign exchange market, but stressed that there was still a long way to go to get the economic back on track.

The former CBN governor stated, “With regards to exchange rate, I can see quite some changes in the last few weeks. I think some steps are beginning to be taken, but it is still quite a long way to go to get to a stable and predictable level that eliminates the premium among the multiplicity of exchange rates.

“Nigeria must get out of multiple exchange rates and we must eliminate the premium, get it back on track at a competitive exchange rate regime. The uncertainty that is created by that is so enormous; and with the oil price rising and with the increase in oil earnings, this is the time to take bold steps and do the needful.”

On how policymakers can eliminate the multiple exchange rates and close the gap, Soludo said it was simple because the nation had done it before.

He said, “On bold steps, the template is not too far. We have done it before and it is just going back to it. If it (the template) is not broken, why mend it? Get back and eliminate the multiple exchange rate regime, eliminate the premium, or at least significantly reduce it to not more than between three to maximum of five per cent premium between the parallel and official exchange rates.

“On what it takes to do it, that is basically known. Get the public finance okay; I can tell you that with the momentum of what is going on in the rest of the world, by the end of this year, we should actually be having stocks of reserves in the range of about $50bn or $60bn.”

According to Soludo, getting the country out of the current economic recession is no big deal as bringing it back to growth.

He said in spite of government policies, the country would come out of the current recession.

He stated, “And getting Nigeria structured and reengineered towards non-oil economy, that again will require a lot more serious work. The recession is not the issue. We will get out of it in spite of government policy.

“I think this is a time Nigeria should actually be making hard decisions to transit away from an oil revenue economy. And that’s the serious work.”

Earlier, the ICAN President, Mr. Titus Soetan, had said that years of neglect and mismanagement had brought the country to its present parlous state.

Highlighting the purpose of the ICAN Economic Discourse, he said, “We took a stance that the challenges confronting us needed to be identified and articulated so that short, medium and long-term solutions could be found for them.

“This is what we sought out to do by inviting experts in various fields to this discourse. We need to hear from people who have the knowledge and expertise and who can share their wealth of experience on how to move on economically as a nation in view of the urgent need to reinvent the economic wheel of the Nigerian economy.”

The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, who was the guest speaker at the event, stated that the nation’s Gross Domestic Product would expand this year by 2.19 per cent and it would go through a stage of 4.62 per cent before getting to seven per cent by 2020.”

He, however, noted that this would be based on the assumptions that Nigeria would remain an exporter of oil, produce 2.5 million barrels of oil per day, and create six million jobs within the period.

“It also means we will increase the overall tax to GDP ratio, which is about five per cent now, to about 15 per cent, and the tax policy will be more efficient and the revenue will increase to about N350bn annually,” Rewane added.

The panellists at the event were the Managing Director of Economics Associates, Dr. Ayo Teriba; Director-General, Lagos Chamber of Commerce and Industries, Mr. Muda Yusuf; a former Deputy Governor, CBN, Dr. Obadiah Mailafia; and Partner, PwC, Mr. Taiwo Oyedele.

Teriba, in his submission, noted that the Economic Recovery and Growth Plan of the Federal Government was triggered by the shocks occasioned by the recession and worsening of the inflation record.

He said, “Nigeria’s economic crises broke out in the course of 2016. We also had foreign exchange crisis, which broke out also in 2016. Perhaps, we should have separated the crisis response from the plan. Crisis response calls for urgency. Mid last year, the currency was devalued. So, we needed the crisis response, we don’t have the luxury.

“In economic policy, there are lags. Lags are well understood. After recognising there is a response lags, what should now be fashioned is the response. There is an action lag. When you have a recession and devaluation, you want to do your best to shorten the lags. Yusuf emphasised the need for the Federal Government to anchor its growth plans on the private sector, emphasising the role of private investments in economic growth.

Mailafia also stressed the importance of a conducive business environment to attracting foreign investors into the country in order to enhance growth.