Nigeria’s Vice-President, Prof Yemi Osinbajo, on Monday said that the current exchange rate of the naira is artificially too low.
He therefore called on the governor of the Central Bank of Nigeria to allow the value of the naira to be determined by market forces.
This comes as the Nigerian currency has fallen to all-time lows in recent weeks at the parallel or black market, where it is currently exchanging as high as N570/$, against an official exchange rate of about N411/$.
In the budget presented by President Muhammadu Buhari on Thursday, the budget estimates were based on an exchange rate of N410.15/$.
Osinbajo spoke at a retreat organised by the government for ministers in Abuja, and argued that the artificial value of the naira was keeping investors away from Nigeria.
“As for the exchange rate, I think we need to move our rates to [be] as reflective of the market as possible. This, in my own respective view, is the only way to improve supply,” he said.
“We can’t get new dollars into the system, where the exchange rate is artificially low. And everyone knows by how much our reserves can grow. I’m convinced that the demand management strategy currently being adopted by the CBN needs a rethink, and that is just my view.
“Anyway, all those are issues that when the CBN governor has time to address, he will be able to address in full.”
He took a swipe at some of the activities of the CBN, noting that some of them are actually fiscal activities that the monetary authorities are dabbling into.
“There must be synergy between the fiscal and the monetary authority. We must be able to deal with the synergy, we must handle the synergy between the monetary authority, the CBN, and the fiscal side,|” he said.
While he did not mention any specific case, some of the interventions by the CBN include those in the power and agricultural sectors under which the central bank has pumped several billions of naira directly into the real sector. It also has interventions into the MSME sector.
Some analysts have criticized the central bank’s foray into direct involvement in such activities but this is the first time views are coming from this level of authority. The vice-president noted however that the statements he made were his personal opinions.
He noted that sometimes observers get the impression that there is a competition between the monetary authorities and the fiscal side. If you look at some of the interventions, you will find that those interventions are interventions that should be managed by ministries.
“The ministry of industry, trade and investment should handle MSMEs interventions, and we should know what the CBN is doing. In other words, if the CBN is intervening in the MSME sector, it should be with the full cooperation and consent of the ministry of industry,” Osinbajo said, in what seems to be the beginning of a policy shift.
