Stories by Amaka Ifeakandu
Lagos
A financial expert has said that sharp devaluation of the nation’s currency would impact negatively on the economy.
Chief executive officer, RTC Advisory Services Ltd, Mr Opeyemi Agbaje, made this remark in Lagos while interacting with financial journalists, saying it is preferable to have flexible exchange rate whereby the currency allow to depreciate gradually.
In his explanation he said my preference is for a flexible exchange rate on a continual basis that allows the monetary authorities to use the exchange rate as a mechanism to deal with demand for dollars, inflation conditions, reserve levels, for dealing with multiple considerations, rather than just one factor as we have done.”
Insisting that sharp devaluation of currency impacts more shock on the economy, he said for instance, in 2008 when the global financial crisis happened, Nigeria had kept its exchange rate at N117 per Dollar and N118 per Dollar for like four to five years, and that immediately the oil prices hit the nation, the exchange rate was moved from N118 per Dollar to N150, and that was a stronger shock to the market.
He however said that flexibility exchange rate send signal to the market, stressing that when the monetary authorities sees that the currency is under attack, they respond by increasing the price of the currency, and when it sees that the currency is strong again, it can even strengthen the exchange rate back, that moderates the monetary policy environment based on a multiple of factors rather than just a single minded commitment to protect the Naira.
On the management of external reserve, he said “It does not make sensible policy to use the reserve to defend the naira. We are using foreign reserves to create billionaire or millionaire illegally at our own expense.”
He explained that anytime there is a rate that is different from the market, it means that one is subsidizingDollar for the FOREX users. He however pointed out that anybody who bought Dollars from Retail Dutch Auction System (RDAS),received a subsidy of N10 to N15 from the Nigerian government.
“This is because everybody knows that it is N170 per Dollar in the market,” he stated, arguing further adding that before issuing a subsidy government should have strategic reasons for doing so, adding that subsidising the school fees of all the people that has their children in schools abroad in not good enough.
“So I don’t support the CBN’s determination, as espoused under Sanusi and supported by most Nigerians to protect the naira at the expense of our reserves and at the expense of our common patrimony, because it is collective subsidy to capital flight, to MTN in remitting its profit, to all the foreign companies remitting their profits,” he concluded