Sequel to an assertion made by economist and chief executive of Global Analytics Consulting Limited, Dr. Tope Fasua, that a unified exchange rate is never going to happen in Nigeria, a differing position has emerged, stating that it is possible to have a unified exchange rate in the country.
During the weekend, at a webinar forum organised by The Alvin Report and Nairametrics, Fasua had said there is hardly any unified exchange rate between the parallel and official in any country, stressing that 50 per cent of the value of any currency was based on perception, and that individuals were entitled to their individual freedoms to bargain whatever rates they were willing to exchange their money for.
However, associate professor, Department of Private and Commercial Law, Babcock University, and Doctor of Energy Law, Professor Tayo Bello told NATIONAL ECONOMY yesterday that it is possible to have a unified exchange rate if there is transparency.
Bello said where there is a lacuna in supply of a foreign currency people will resort to creating a parallel market and sell above the legal maximum, which is the black market.
He said any country that wants to grow will allow market forces to determine the value of the currency against another countries’ currency.
He warned that at the current rate of the naira slide it may exchange for N800 (eight hundred naira) for a dollar and more than N1,000 (one thousand naira) for a British Pound sterling by December.
He stressed that the value of the naira is sliding so fast because the country is hardly exporting anything in tandem with what it imports.
He stated that those consuming the dollar are too many, including persons who consume it for health and education tourism, as well as luxury vacations.
He also blamed the naira slide on lack of sincerity, citing that some Nigerians buy the dollar at a lower rate from official rates and sell to the black marketers.
Bello said the federal government is not supposed to be involved in the buying and selling of foreign currencies. He cited The Gambia as an example where the government has no business with the buying and selling of foreign currency.
Buttressing Bello’s position, Divisional Head of Strategy, Heritage Bank, Segun Akanji had said that Nigeria does not over import, but under-exports.
Another economist at Usman Danfodio University, Dr. Abdul Mansur said as long as aspects of economic activities are shrouded in mystery, the naira will never be unified. He cited frivolous contracts, unsubstantiated expenditure in the civil service, bloated contracts and all pervasive corruption as factors militating against the local currency, which makes it vulnerable to the pressure of other currencies.
On the other hand, Head, Agusto Consulting, Jimi Ogbobine said over the decades, the country’s rate of inflation has averaged 12 percent. When pitched against currencies like the dollar, whose inflation rate averages 2 percent, it is clear why the naira is on a constant downward slide against the dollar and other currencies of stable economies.
Fasua had blamed the security situation in the country as having a run on the economy because the situation stalls investments. He stated that the government has been investing a lot of money to support the people in the form of palliatives but that has not translated to productivity, which also has a toll on the naira. He added that all that money is in the system and chasing the dollar, which is also contributing to the naira hemorrhage.
He said the CBN has to expand the eligible transactions for forex eligibility.
Fasua stated that Nigeria’s problem is also linked to perception. He said there are different exchange rates everywhere depending on individuals’ negotiations, adding that a unified exchange rate is never going to happen.
He said leaving the value of the naira to the forces of demand and supply is an action that would lead downhill. Stressing that the issue of the value of the naira is based on perception, he alluded that Ghanaians value their currency more than the dollar, which is different from what obtains in Nigeria.
He said 50 per cent of the value of any currency, especially for developing countries like Nigeria, is based on perception, which is shorting the naira.
Fasua said if the Nigerian and the US economies should be compared based on productivity the value then the naira may lose value up to $1.00 to N5,000.
Ascribing the hemorrhaging of the naira to the entire Nigerian project, Fasua advised that the naira not be fixed to any currency as that would be a recipe to short the local currency.
He also said Nigerians should stop the self-fulfilling prophecy that the naira is worth nothing. He said with that attitude the naira would lose value.
He also queried the idea of over-borrowing and devoting 95 per cent of the revenues accruing the government going to the servicing of debt, warning that it would be dire if multiple creditors have the payments due at the same time.