Former Governor of the Central Bank of Nigeria (CBN), Muhammadu Sanusi II, has expressed support for the steps so far taken by apex bank towards achieving its stated objective of exchange rate unification.
Sanusi, who stated this yesterday while participating in a webinar titled, “United States of Naira:
What price for unification?” which was hosted by the currency trading solutions firm, AZA, said that the CBN should not get into a panic, but wait for oil prices to rise to enable it build up its foreign exchange buffers.
Commending the CBN for embarking on exchange rate unification, the deposed Kano Emir noted that the move would curb arbitrage in the forex market in addition to making forex transactions more transparent.
The CBN has been under pressure from both the World Bank and International Monetary Fund (IMF) to unify the country’s multiple exchange rates as part of measures to improve the transparency of its currency-management system.
On July 7, the apex bank adjusted the exchange rate at the official window, according to data on FMDQ website, by 5.54 per cent to N381 per dollar from N361/$, sparking speculations that it had officially devalued the local currency.
A few days earlier, the CBN had adjusted the naira’s rate from N360/$1 to N380/$1 at the Secondary Market Intervention Sales (SMIS). There have been calls from some quarters that the CBN should officially recognize N381 per dollar as the official rate, a move, some traders say, would ease pressure on the naira on the parallel market.
But Sanusi said that the CBN should ignore such calls, stating that given oil price volatility, the bank should maintain its stance of only stating that it was committed to exchange rate unification while waiting for oil prices to head north.
According to him, “CBN has to avoid getting into a panic and basically wait for oil prices to go back up.” He stated that while he welcomed the fact that the CBN is heading towards exchange rate unification, the banking watchdog, however, needs more support from other arms of government, especially with regard to ensuring more forex savings for the country.
“The CBN is taking too much of a burden for other sectors and other arms of government,” he said, adding that while the scrapping of fuel subsidies is a good development, the Nigerian National Petroleum Corporation (NNPC) still has to step up efforts to help conserve forex.
Sanusi said it was important that the CBN should not deplete the external reserves in a bid to defend the naira, noting that healthy reserves helped to shield the economy during the global financial crisis of 2008/2009 and also helped him implement the banking reforms of that period.
Also speaking at the webinar, the Chief Executive Officer, Renaissance Capital Nigeria, Mr. Temitope Popoola, said that while the CBN is right to focus on exchange rate unification, the issue of lack of liquidity in the system has to be addressed.
He said: “Before now, we had multiple exchange rates, but there was liquidity. But now, the concern is that we going towards rate unification, but there is no liquidity.”