Managing Director, Parthian Partners Limited, Mr Oluseye Olusoga, has said that an attempt to unify Nigeria’s exchange rates would imply some level of official devaluation, which would bring additional benefits.
Olusoga who made this statement while having interview with CNBC Africa said that unifying exchange rate is a difficult task that must be done and would require a lot of courage to achieve.
He said that once the rates are converged, there would be better free flow of money and reduced arbitrage concerns.
He however, said although accomplishing this task is challenging due to the rising cost of living and the need for people to adjust to the new normal but he believe that it is necessary for Nigeria to reach its full potential.
He said rather than taking a gradual approach, in unifying the rates, the process should be market driven.
For the country to achieve this milestone, he said “Nigeria should increase its daily oil production for exports and diversify into sectors such as mining to generate foreign exchange. The central bank can act as a regular market participant, trading excess dollar supply to meet demand. The laws of supply and demand would help stabilize the market.”
Making reference to the statement of former president of the World Bank Group, he said a slow unification process often results in no unification at all due to pushback and vested interests, insisting that the unification process should be swift rather than gradual.
He said although it may be painful but the impact might not be as severe as anticipated.
Citing an example he said if the country were to announce a free float exchange rate of N780 or N760 per dollar, the rate would quickly drop to around N700 because people would stop hoarding, adding that the limited number of people who have access to dollars at the current rate is worth considering.