A former deputy governor of Nigeria’s Central Bank, Kingsley Moghalu has said the country’s currency – the Naira – keeps falling in value because handlers of the Nigerian economy is pursuing an economic policy that is not grounded in any clear philosophy.
Moghalu, a professor of International Business and public policy stated this when he featured on ARISE News Morning Show and noted authorities are yet to get right the balance between the state and the market place.
According to Prof. Moghalu, “the Naira’s problem is that the central bank is trying to control the price of the Naira in the market and it is subsidising, in fact, the Naira is on steroids from forex interventions in the banks and this is bringing down our foreign reserves level significantly.
“When the market itself perceives that the actual value of the currency vis a vis foreign currencies is subsidised, a massive parallel market will naturally develop and investors will have hesitation in investing in the Nigerian economy and there will, in fact, be a lot of capital flight.
“I have advocated that the Naira should be valued on the basis of a market-determined flexible exchange rate, you can put in a very simple way, float the Naira. It’s a controversial proposition, but I say that it is better than what we are going through and it will yield results that are positive for Nigeria if it is planned properly and executed properly.
“You do not just continue to devalue the Naira without reforming trade policies. You have to float the Naira to create an incentive for exports to earn foreign exchange, right now so long as the Naira continues to be subsidised, you are creating an incentive for an import-dependent economy which is what Nigeria has been for the past 50-years.”
By Abel Ejikeme