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‎Eliminate Multiple Exchange Rates – Soludo Tells CBN

A former Governor of the Central Bank of Nigeria, CBN, Chukwuma Soludo, has charged the apex bank to reduce the difference between the official and parallel market exchange rates of the Naira to between three to five per cent.

Mr. Soludo, who spoke as a guest at an Economic Discourse organised by the Institute of Chartered Accountants of Nigeria in Lagos on Monday, said the CBN must also eliminate multiple exchange rates’ regime in the market.

“Nigeria must get out of multiple exchange rates and we must eliminate the premium, get it back on track at a competitive exchange rate regime,” Mr. Soludo said.

“The uncertainty that is created by that is so enormous; and with the oil price rising and with the increase in oil earnings, this is the time to take bold steps and do the needful.”

Nigeria’s local currency, the Naira, currently has about five exchange rates, analysts said.

But Mr. Soludo, who commended steps taken by the CBN to restructure the foreign exchange market, stressed that the apex bank still had a long way to go to get the economy back on track.

The former CBN boss pointed out that policymakers were expected to take bold steps that would navigate the country away from crude oil dependency to a non-oil economy.

“With regards to exchange rate, I can see quite some changes in the last few weeks. I think some steps are beginning to be taken, but it is still quite a long way to go to get to a stable and predictable level that eliminates the premium among the multiplicity of exchange rates,” he said.

“On bold steps, the template is not too far. We have done it before and it is just going back to it. If it is not broken, why mend it? Get back and eliminate the multiple exchange rate regime, eliminate the premium, or at least significantly reduce it to not more than between three to maximum of five per cent premium between the parallel and official exchange rates.

“On what it takes to do it, that is basically known. Get the public finance okay; I can tell you that with the momentum of what is going on in the rest of the world, by the end of this year, we should actually be having stocks of reserves in the range of about $50bn or $60bn.”

Mr. Soludo, however, noted that getting the country out of the current economic recession is not as herculean a task as bringing it back to growth, adding that in spite of government policies, the country would come out of the current recession.

“And getting Nigeria structured and reengineered towards non-oil economy, that again will require a lot more serious work. The recession is not the issue. We will get out of it in spite of government policy,” he said.

“I think this is a time Nigeria should actually be making hard decisions to transit away from an oil revenue economy. And that’s the serious work.”

In his remarks, the Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, who was the guest speaker at the event, stated that the nation’s Gross Domestic Product would expand this year by 2.19 per cent and it would go through a stage of 4.62 per cent before getting to seven per cent by 2020.

Mr. Rewane, however, said that this would be based on the assumptions that Nigeria would remain an exporter of oil, produce 2.5 million barrels of oil per day, and create six million jobs within the period.

“It also means we will increase the overall tax to GDP ratio, which is about five per cent now, to about 15 per cent, and the tax policy will be more efficient and the revenue will increase to about N350bn annually,” he added.

On his part, Titus Soetan, the ICAN President, noted that years of mismanagement of resources brought the country to its present situation.

Other participants at the event include the Managing Director of Economics Associates, Ayo Teriba; Director-General, Lagos Chamber of Commerce and Industries, Muda Yusuf; a former Deputy Governor, CBN, Obadiah Mailafia; and Partner, PwC, Taiwo Oyedele.

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