Mohammed Shosanya
The Centre for the Promotion of Private Enterprise ,CPPE,has expressed support for the bold step taken by the Tinubu administration towards the unification of the naira exchange rate in the country.
Its Chief Executive Officer,CEO,Dr.Muda Yussuf,said in a statement on Wednesday that liberalization of the foreign exchange market would unlock the huge potentials for investment, jobs and capital flows.
Investors’ confidence,he said, would be positively impacted on account of the new policy,which he explained is a pricing mechanism that reflects the demand and supply fundamentals in the foreign exchange market.
He said:”It is a framework which allows for flexible rate adjustments as and when necessary. It is a model that is predictable, equitable, transparent and sustainable.
” It is a policy regime that would reduce uncertainty and inspire the confidence of investors. It would minimize discretion and arbitrage in the foreign exchange allocation mechanism. Rate unification does not imply that rates will be exactly the same in all segments of the market.
He said the the objective is to ensure that the differentials are very minimal, possibly between 5-10%
He added:”A unified exchange rate regime offers the following benefits for the economy:It enhances liquidity in the foreign exchange market.It reduces uncertainty in the foreign exchange market and therefore enhances the confidence of investors.It is more transparent as mechanism for forex allocation.
“It minimizes discretion in the allocation of forex and reduces corruption vulnerabilities.It reduces opportunities for round tripping and other sharp practices.
“It would increase disclosures with respect to export proceeds and compliance with non-oil export declarations, especially the non-oil export documentation [NXP]. It would boost government revenue by a minimum of N4 trillion through additional remittance of exchange rate surplus to the federation account by the CBN.
“The use of naira cards for limited international transactions would be restored in the short to medium term.It would facilitate the mopping up of naira liquidity in the economy in the short to medium term.
“This would impact positively on inflation outlook.It would deepen the autonomous foreign exchange market through the liberalization of inflows from Export Proceeds, Diaspora Remittances, Multinational oil companies, diplomatic missions etc”
He advised the Central.Bank of Nigeria to position itself for periodic intervention in the forex market, as and when necessary, to stabilize the exchange rate and prevent volatility.
He said,this should happen not by fixing rate, but by boosting supply to the extent that the reserves can support.
