Vice President Yemi Osibanjo has expressed concern over the current exchange rate management model in Nigeria.
It operates a floating system managed by the Central Bank of Nigeria, which maintains naira controls through its Nigerian Autonomous Foreign Exchange Exchange (NAFEX).
Nafex was introduced by the bank in 2017 to deal with the foreign exchange crisis that affected the value of the naira at the time. Daily Nafex rates are determined from rate submissions by the 10 contributing banks that offer foreign exchange on behalf of their clients.
The model has not done much to improve the value of the naira which has fallen to about N444 in the official market and over N800 in the unauthorized parallel market.
“Our exchange rate regime remains a concern,” Mr. Osinbajo said at the Nigeria Summit in Abuja on Tuesday.
“The discussion we need to have, away from feelings, is how best to manage the situation by finding a mechanism to increase supply and moderate demand, which will be transparent and promote trust.
“I’m sure most of you remember that there have been several efforts in the past, such as the Interbank Foreign Exchange Market, the Retail Dutch Auction System, the Wholesale Dutch Auction System, etc.
“Although they were not perfect, the rules were clear and the gap between official and parallel markets was not that wide,” said Mr. Osinbajo, who heads the government’s economic team.
He said apart from the monetary measures being taken by the Central Bank of Nigeria, Nigeria needs to increase domestic production of food and ensure that it reaches the market.
Osibanjo called for urgent measures to reduce inflation.
“Inflation in Nigeria is partly structural resulting from infrastructural deficiencies, but there is also an aspect caused by increased money supply, imported inflation and the depreciation of the naira,” he added.
In order to reduce inflation, he said the nation should pay more attention to the institutional approach of the government’s Food and Employment Agriculture Program which aims to help small farmers.
The programs ensure uptake of their produce, supporting large farmers, suppliers of manufacturing companies and commodity exchanges at all stages of production.
“It is now clear that if there is one global problem that will affect local economies the most, it is climate change,” he said.
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