Nigeria's New Forex out of tune with economy,needs review-Economists

The Nigerian Economists Society (NES) has urged the Central Bank of Nigeria (CBN) to review the new foreign exchange (forex) in line with the country's economy.

NES also warned that the country may slide into depression, saying the flexible forex regime of the CBN cannot survive in a non-productive economy.

They said managed float policy is a better option given the Nigerian economy’s current local productive capacity and over-dependence on crude oil as its major source of forex earning with its price determined exogenously driven in the global market.

The economists, majorly varsity dons, spoke separately yesterday at a one-day symposium on the topic: “Managing the Naira”, at the University of Uyo.

According to them, given the structure of the economy, the current forex  policy is not a viable option as it suits an industrialised economy of which Nigerian economy has not yet reached.

A communiqué issued by the society at the end of the programme urged the Federal Government to declare national economic emergency to galvanise the entire country into action in order to save the economy.

“The new foreign exchange policy which implies that the exchange rate will be determined by market forces (clean float) is faulted as it admonishes a spot and forwards, assumes the economy is sophisticated and productive in producing needed goods and services typically of the advanced economies, when the actual problem in the foreign market is a supply-side issue (scarce availability of foreign reserves) which is insufficient to satisfy the demand.

“Floating will generate macroeconomic instability as financial market participants stand to gain through market speculation which will only stimulate portfolio investment (hot money) as the real or “green field investment’ which is expected to generate wealth and create employment would not be attracted because of macroeconomic uncertainty.