Renowned economist and Chairman of President Muhammadu Buhari’s Economic Advisory Council (EAC), Dr. Doyin Salami, has said that the country must adopt an exchange rate policy “that allows the economy to grow.” He stated this in his keynote address at the 7th National Economic Outlook organised by the Chartered Institute of Bankers of Nigeria (CIBN) in collaboration with B. Adedipe Associates, in Lagos yesterday.
He said that the biggest challenge currently facing Nigeria was how to attain macroeconomic stability, adding that one of the ways to achieve this is for the country to adopt an exchange rate policy that allows the economy to grow. As he put it, “Nigeria must adopt an exchange rate policy that allows the economy to grow. Let me make it abundantly clear, this is about using exchange rate policy to grow the economy and not about devaluation.
The first key challenge around exchange rate policy is around growing confidence.” He emphasised that attaining macroeconomic stability was key to boosting confidence in the country’s economy. According to Salami, “in terms of policy, I think the biggest challenge that we face now is how do we attain macroeconomic stability? And what do I mean by macroeconomic stability? If you look at the yields on various instruments across the short and long-term, they are far below inflation which therefore means that real returns are negative and one would not be surprised to see switching of assets, which in my view explains why the stock exchange rallied to be the best performing stock exchange in 2020.”
Continuing, he said: “The economy requires massive amount of investments. And we will achieve that investment if we have macroeconomic stability. We need a set of policies that would enable us to bring down inflation and accelerate growth. Macro- stability is about bringing down inflation and bringing growth.” The financial expert, who predicted that the whole of 2021 would be substantially shaped by COVID-19 and the response to the virus, noted that external factors played a key role in driving most internal responses and outcomes. He said: “For us there are four things within the external environment that we must always pay attention to.
The first one is what is happening to international policy, the second is international trade, third is international capital movement and of course diaspora transfers. These for me are the four key things that drive the Nigerian economy from outside of our borders. When you look at the international environment, the prognosis is that this will be a better year than 2020.” He, however, predicted that the oil sector would be a major element of how 2021 turns out for Nigeria.