Lagos – Financial experts on Wednesday backed decision of the Central Bank of Nigeria (CBN) to operate a flexible exchange rate.
The experts in Lagos said that the policy would frustrate currency speculation and hoarding.
Mr Harrison Owoh, a Bureau De Change (BDC) operator said that the policy would impact positively on the economy and remove distortion, hoarding and speculation in the currency market.
Owoh said that allowing the forces of demand and supply to dictate the exchange rate was a universal policy that would discourage corruption in the foreign exchange market.
He said, “ Nigeria operates a peculiar economy where risen commodity prices do not come down in spite of a better economic policy and environment.
“Flexible exchange rate will remove distortion, hoarding and speculation of currency in the economy.
“It is one of the mechanisms used in the foreign exchange market to discourage round tripping.
“The policy has been successful in advanced economies of the world,” Owoh said.
On the other hand, the expert explained that the policy in the short term may hurt the economy because of the dwindling revenue accruing from the sale of crude oil.
Prof. Sherriffadeen Tella, a Senior Economist at the Olabisi Onabanjo University, Ago-Iwoye said that the implementation of a flexible exchange rate would reduce corruption in the currency market.
According to Tella, the wide gap that existed between the official exchange rate and the parallel market rate has encouraged corruption, giving birth to a huge army of currency speculators.
“CBN official rate had been used by currency speculators and hoarders as a conduit pipe to drain the economy, no thanks to the disparity between the official and black market rates,” he said.
The economist said that a flexible exchange rate would create a level playing field for all in the economy.
The don, however, urged the Federal Government to create an enabling atmosphere for the manufacturing sector to thrive in order to increase the nation’s capacity to earn in dollars.
NAN reports that CBN at the end of its Monetary Policy Committee (MPC) meeting on Tuesday, resolved among others to adopt a flexible exchange rate for the economy.
“The foreign exchange market framework, now ready, the MPC voted unanimously to adopt greater flexibility in exchange rate policy to restore the automatic adjustment properties of the exchange rate.
“Consequently, all nine members voted to hold and introduce greater flexibility in managing the foreign exchange rate.
“The Bank will however, retain a small window for funding critical transactions,’’ CBN said.