CBN’s Adjustments of Naira from N360 to N380 at SMIS: – UNIFYING THE EXCHANGE RATE: GOOD BUT BAD TIMING
One of the challenges we observed in the management of the economy by the fiscal and monetary policy makers have been misalignment and improper timing of the policies. Following the approval of the US$3.4billion via the Rapid Financial Instrument by the International Monetary Fund (IMF), which highlighted the need for the unification of the exchange rate among other measures. We believe that, with the ravaging effect of the impact of COVID-19 on business and workers, yielding to the pressure of the IMF at this time is not a welcome development to the economy.
We are aware of such proposal to other economies like Venezuela, Iran and Egypt, who are developing strategies to introduce cushioning measures for managing the impact of the devaluation or unification of the exchange market.
We are aware of the positive impact of unifying the exchange rate, as we are in full support of shunning multiple currency practices, this we believe, has not demonstrated the true reflection of the naira in the market. Nevertheless, we are weary of the implication of the sudden unification of the exchange rate to the economy at this time, which we believe will be counterproductive, as a nation like ours that depend hugely on importation of raw materials, equipment, fuels (most especially). We are sure this will imply higher cost of all imported products- fuel, which means, the country will need to re-introduce subsidy regime , which we had solicited for abolition in its entirely.
We advocate for a gradual unification of the exchange rate, as the timing is not just right. We solicit for more cushioning measures, like, expanded cash transfers to workers to boost demand, grants or low-interest loans to business, before such policy can be productive to the economy.