Vice-President Yemi Osinbajo has made a passionate call to the Central Bank of Nigeria to fix Nigeria’s foreign-exchange market.
Osinbajo has been critical of Godwin Emefiele’s stance on retaining a managed floating of Naira against foreign currency.
A managed floating exchange rate is an exchange rate system that allows a nation’s central bank to intervene regularly in foreign exchange markets to change the direction of the currency’s float and/or reduce the amount of currency volatility.
Following the difficulties in those markets with FX supply, the CBN has always maintained a culture of intervening in the various foreign exchange markets, such as the I&E and Secondary Market Intervention Sales windows, over the years.
Speaking at the ongoing Nigerian Economic Summit organised by the Nigeria Economic Summit Group (NESG), Osinbajo noted that the current exchange rate regime remains of concern.
According to him, there is a need to find a solution before it gets out of hand.
His words:
“This is by finding a mechanism for increasing supply and moderating demand which will be transparent and will boost confidence.”
BusinessDay reports that Osinbajo recalled that several efforts had been made in the past such as the Interbank Foreign Exchange Market, Retail Dutch Auction System, and Wholesale Dutch Auction System.
He said:
“All of these discovery mechanisms which, at least, were transparent, evidence for all to see and they worked. So, I think that what we should be looking for is not necessarily any perfect rules, but we must certainly prevent the type of arbitrage that we have.”
The current legal framework within which the CBN operates is the CBN Act of 2007, which provides that the CBN shall be a fully autonomous body in discharging its functions.
In line with this, the Act widened the CBN’s objectives to ensure monetary and price stability and only render economic advice to the Federal Government.
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