By Michael Eboh
Financial analysts have applauded the decision of the Central Bank of Nigeria’s not to devalue the naira , warning that devaluation should not be used as a primary policy tool for the attainment of macroeconomic equilibrium.
Speaking at the 12th Mandatory Seminar/Induction ceremony of the Chartered Institute of Finance and Control of Nigeria, CIFCN, Mr. Peter Amah of the Department of Finance, University of Lagos, stated that devaluation of the country’s currency cannot be relied upon as a tool to grow the economy, adding that it cannot help in stimulating local production of goods and douse the demand for import.
According to him, any devaluation now will create condition for calls for further devaluation in the future, especially given the state of constant tension between official and parallel foreign exchange markets. He said, “Devaluation may only serve some non-core purposes in the mean time being consequential price and income effect namely that, it will re-flate the naira revenue and fund the skewed budget system to feed into fiscal exuberance which only has nominal effect on the economy.”
“Nigerians may need to work harder to settle indebtedness, pay bills to foreigners and sustain production and employment overseas. Accordingly, the costs to devaluation would appear to overwhelm the benefits contemporaneously.” Instead, Amah advised the monetary authorities to consider other alternatives, such as adopting an exchange rate targeting approach through the use of a managed float system, which does not rely on the moves of speculators in determining exchange rate.
He further called on the CBN to strengthen the use of trade and exchange control measures to curb illicit and unproductive imports, and encourage diversification in the production of domestic and tradable goods. “Such measures include imposition of tariffs and outright ban on a select group of goods in such a manner that protect local businesses without hurting global trade.
“Accordingly, this protection and incentives should be extended to producers of goods for which the country has comparative advantage and those of high national priority,” he said. Also speaking, Professor Mike Nwaubani, President/Chairman, Governing Council, CIFCN, lamented the rising incidences of corruption and financial recklessness, stating that the Institute has resolved to partner with the relevant government and private organisations to address these social ills.
He said CIFCN has entered into a partnership with the Federal Government to entrench probity, accountability and transparency among financial professionals in the country and in every sectors of the economy. Speaking on the institute, Nwaubani stated that in spite of its short period of existence, the CIFCN had made giant strides and had been engaged in a number of initiatives that had helped in creating a positive image for the Institute.
He said, “We have tried to collaborate with various organisations, both in the private and public sectors. Such collaboration is already on with the Office of the Special Adviser to the President on Ethics and Values. We are almost on the verge of consummating another with the Independent Corrupt Practices and Other Related Offences Commission, ICPC.
“In the last induction, we prepared and sent to the CBN, the Institute’s inputs to its Competency framework on the area we believe it is relevant.”