Of course, abel bentin interbank forex is no longer news that the era of fixed foreign exchange regime ended on Monday, June 20, 2016 when a flexible foreign exchange market commenced. That day marked the end of the period of determined effort of the Buhari administration’s resistance to naira devaluation. Thomson-Reuters Order Matching System as well as the Conversational Dealing Book. Mouthful of technical jargon aside, Nigerians rightly dread anything that is purely market driven, deriving from previous experience like SAP.
Furthermore, CBN will participate through periodic interventions. FX primary dealers will be registered to deal directly with the CBN for large deal sizes but FX primary dealers will deal with other authorized dealers. There will be no more spread restrictions. The 41 items classified for not valid for FX are still not admissible in FX interbank market. Ganiyat Adesina-Uthman, who is the Dean of the Faculty of Social Sciences, NOUN, believes the policy will lead to diversification of the economy, a shift to alternative goods and a reduction in dollarization of the economy. She added that floating exchange rate and limitation in a number of forex items will have some positive implications on the Nigerian economy such as promotion of locally produced goods.
To achieve diversification of the economy, Dr. Ganiyat Adesina-Uthman suggests exploring non-oil sector with large-scale investments to increase productivity that can increase exportation. She believes that the effects of depreciation of naira value may not be felt so much if Nigeria joins again the comity of exporting nations. My take on the new forex policy is that the CBN failed to do a scientific analysis of the forex economics and the associated politics. It is trite to state that most developed countries protect the value of their currencies economically and politically.
The Dollar and the British pound are enjoying this protection knowing fully well that the strength of any country is the value of her currency. The government should as a matter of urgency put up an economic committee to be made up of the academia and committed technocrats to direct the economy and not bankers and politicians. This is because some bankers and politicians have deposits of dollar and pounds in local and foreign banks. They also keep their foreign currency at home and farms.
However, since CBN has tactically devalued the naira, I will not cry over spilled milk I wish to point out like Dr. Ganiyat Adesina-Uthman did, that one of the ways to enhance the value of the naira is, to some extent, through an export-oriented economy. This will put less pressure on the dollar. The new exchange rate regime could enable export-led growth.