Dr Etubom Ani, a former Minister of Finance, has said that devaluation and flexibility of the exchange rate were not the answer to the current economic challenges in the country.
Ani said this while delivering a keynote address titled: ‘Of Exchange Rate Mechanism, Exchange Rate and Devaluation’ at an induction ceremony of new members of the Institute of Chartered Accountants of Nigeria (ICAN) in Lagos.
The minister, who served during the Abacha era. said that the nation’s exchange rate mechanism was destroyed when the country was cajoled into debt cancellation programme.
He said that there was the need to restore that mechanism and adopt a realistic exchange rate.
According to him, government must make the naira to be internally convertible again.
“We must realize that the naira had in the past been over-devalued with no corresponding production or productivity to follow.
“I hold the view that Nigeria must not devalue and that President Buhari is right in resisting devaluation.
“I have chosen the topic “Of Exchange Rate Mechanism, Exchange Rate and Devaluation” because exchange rate has an impact on every citizen, young or old, man or woman.
“We are an import dependent nation and since exchange rate is the price of our currency in terms of the dollar which we use to pay for our imports, it must impact on the economy”.
Ani said that the Outbound Money Transfer Service must be stopped and all remittances retained to stabilise the exchange rate mechanism.
He said that the excess liquidity in the banking system arising from foreign exchange operations should be mopped up and retained by the Central Bank of Nigeria (CBN) at zero per cent interest.
Ani urged the CBN to continue to play the central role in the Autonomous Foreign Exchange Market.
“The CBN must fund the real sector of the economy without exception for its foreign exchange requirements.
“Any prohibition should be done by tariff adjustment. Commercial banks will fund the other sectors.
“All foreign exchange earnings in respect of the nation’s oil and gas operations will be retained by the CBN, while remittances and non oil imports earnings will be retained by the commercial banks for their operations at AFEM.
“The CBN must allow the Bureau De Change (BDC) to operate on its own and must stop funding them,” he said.
Ani also said the parallel market rates must be crashed and a more realistic and sustainable rate ascertained for the naira with an overage of not more than two per cent.
He said that the country must find its way back into the comity of nations operating letters of credit.
“A situation where we operate through correspondent banks makes our imports to be expensive and have adverse impact on the generality of Nigerians.
“Our motto should be production, production, production.
“We must repair our refineries and produce all our petroleum product needs.
“We must produce our food requirements.
“The re-exporting of remittances from Nigerians in diaspora must stop”.
He said that CBN must rescind and repudiate the Outbound Money Transfer Service as that was the window for the re-export of remittances.
He advised that the CBN should enter into wider consultations aawith the Minister of Finance and the Minister of Planning before introducing schemes that appeared to authorise capital flights.