The Vice President of Nigeria, Yemi Osinbajo, has criticized the Central Bank of Nigeria’s foreign exchange policy and advised the bank to adjust the official exchange rate of the naira in a realistic manner that will attract forex inflow into the country.
The vice president gave the advice while reviewing the Economic Sustainability Plan at the ‘Mid-Term Ministerial Performance Review Retreat’ held in Abuja on Monday.
The VP also lamented the dwindling oil revenues, poor foreign investment inflows both Foreign Direct Investments and Foreign Portfolio Investment
He said the problems are largely due to exchange rate concerns and uncertainty around the repatriation of profit and security concerns.
Osinbajo said “As for the exchange rate, we have to move our rates to more reflective market as possible in my own respective view is the only way to improve supply.
“We can’t get new dollar in the system where the exchange rate is artificially low and everyone knows by how much our reserves can grow.
“So, I am convinced that the demand management strategy currently being adopted by the CBN needs [a] rethink and that’s just my view about that. But anyway, all those are issues am sure that when the CBN has time to address, it will be able to address in full.”
Nigeria is facing high foreign exchange liquidity problem which had led to the devaluation of the naira thrice since 2020.
In March 2021, the CBN devalued the official rate naira to trade at the NAFEX Investor & Exporter forex window rate of N410 per dollar.
At the parallel market, the naira currently trades around N575 leading to investors preference of the market which gives them better quote.
But experts have argued that the rate differentials between the two rates are too unrealistic.
In the same month, the apex bank offered an incentive of N5 for every dollar remitted into the country through official channels.
Recently, to address the rising price of the naira, the CBN banned the sale of dollar to Bureau de Change operators, while banks have been appointed to oversee the role performed by the black-market operators.
Osinbajo during his presentation also questioned the legitimacy of CBN interventions, adding that the apex bank should allow the Ministry of Trade and Investment to handle MSMEs interventions.
He said, “Now I think that many of these problems are complete resolvable. I don’t think that they constitute any significant difficulty that we cannot resolve.
“But I think that one of the most important things is that there must be a synergy between the fiscal and monetary authorities which is absolutely crucial.
“We must be able to deal with the synergy, we must handle that synergy between the monetary authority the CBN and the fiscal side. Sometimes it appears that there is competition between them especially on the fiscal side.
“If you look at some of the interventions, you will find that those interventions are interventions that should be managed by the ministries. So, the Ministry of Trade and Investment should handle MSMEs interventions and those kinds of interventions.
“We should know what the CBN is doing. In other words, if the CBN is going to intervene in MSMEs sector, it should be with the full co-operation and concern of the Ministry of Trade and Investment.”