CIBN Backs Tinubu on FX Rates Unification
The Chartered Institute of Bankers of Nigeria (CIBN) has commended President Bola Tinubu for unifying the Naira exchange rate to save the country from a financial crisis. The President/ Chairman of the Council of CIBN, Dr Ken Opara, said this at the 2023 Lagos Bankers Night with the theme, ” Exchange Rate Unification: Glocal Implications, Organisations, and the Country “, on Friday night in Lagos.
According to him, the institute has always advocated transparency and a free market that would allow the interplay of supply and demand.He said, “The Chartered Institute of Bankers of Nigeria totally supports the Central Bank of Nigeria’s reform as it relates to the unification of the exchange rate and other measures basically taken to ensure the true value of the Naira.
“As a matter of fact, we have been advocating for this and during the week, Dr ‘Biodun Adedipe, leading other scholars, and Mr Laoye Jaiyeola of the Nigeria Economic Summit Group, gathered at the Bankers House to applaud the reform, especially as it relates to the unification of the exchange rate.
“We have seen that the effort that the Central Bank of Nigeria has initiated is already yielding dividends. We can see that the exchange rate between the Naira and the dollar has started coming down which means it is a good initiative that is well thought out.”
Opara said that the institute recently organised a half year economic review, where captains of industries also spoke in support of the reform.
He urged Nigerians to take advantage of the good opportunities that the reform had presented, saying wherever there are challenges lie in opportunities. The CIBN president pledged the institute’s continued commitment to making contributions and suggestions relating to what should be done to support and grow the country.
He said, “As it is the concept of the industry; we played this role very well when the industry was facing challenges and we will continue to do that because we believe that the banking industry is very solid, stable and efficient.” He described the payment system in Nigeria as “the best” all over the world, stressing that it is a system that one could consummate transactions on an online real-time basis.
Opara said this showed that the banking industry and its regulator had done well in stabilising what an effective payment system.
He debunked media reports that its Lagos branch was not in support of the exchange rate unification, describing as “untrue”, but calculated to cause panic.
Chief Consultant of B. Adedipe Associates Ltd. (BAA Consult), Dr ‘Biodun Adedipe, said that the exchange rate unification, which was not new in Nigeria, had gone through the route before with different appellations.
“Let me trade very quickly what I brand as Nigeria’s journey to exchange rate unification.
“Nigeria has gone through this route before but with different appellations like devaluation, correction, alignment, depreciation, all of which are matter of semantics.
“The simple interpretation of this is to remove the premium on the official rate and the parallel market or roadside market. Of course, this is a typical Bretton Woods recipe; keep premium within five per cent to disincentivise round tripping and then find liquidity to sustain it.
“This is the easy way out; but, it never brings an enduring solution to the persistent crisis in the external sector of the Nigerian economy.”. According to him, there are 54 evidence-based research documents to establish that free float is not always the most appropriate for all economics.
Giving historical illustrations, the expert noted that exchange rate movements had a more significant impact on all other prices than interest rate adjustment. He said the only period that Nigeria experienced a successful and stable rate convergence in the country was when it had a significant external reserve.
Adedipe said it took the country an average of two to six weeks for the parallel market rates to diverge from the official exchange rate during each episode of premium removal. He added that speculative attacks on the currency occurred each time there was no clear sight to a stable and enduring supply.
President Bola Tinubu, had during his inauguration on May 29, said his administration would seek to bring the different exchange rate regimes being operated across the country’s foreign exchange channels under a single regime.
However, in June, Tinubu through the Special Adviser on Special Duties, Communications, and Strategy, Dele Alake, announced the implementation of a unified exchange rate to save the country from a financial crisis.
He emphasised that his decision to implement a managed float, similar to his approach to fuel subsidy removal, was in the best interest of Nigeria. Nigerian Treasury Bills Yield Rises to 7%