Vice President Yemi Osinbajo has criticized the Godwin Emefiele-led Central Bank of Nigeria’s foreign exchange policy and urged the CBN Governor to adjust the official exchange rate of the naira to reflect market realities.
Osinbajo, who gave the advice during a speech at the Midterm Ministerial Performance Review Retreat which held at the Banquet Hall, Presidential Villa, Abuja, lamented that Nigeria’s official exchange rate is “artificially low” and has adversely affected investor confidence and investment appetite.
The Central Bank’s official rate is N410 to a dollar, but rates in the parallel market hover between N570 and N576.
Osinbajo said: “As for the exchange rate, I think we need to move our rates to be more reflective of the market as possible.
This, in my own respectful view, is the only way to improve supply. We can’t get new dollars into the system when the exchange rate is artificially low. And everyone knows by how much our reserves can grow.
“So I’m convinced that the demand management strategy currently being adopted by the CBN needs a rethink.
“All those are issues, I’m sure, that when the CBN Governor has time to address; he will be able to address in full.”
The multilateral institution therefore urged the Nigerian government to create the environment for a more predictable foreign exchange management system.
In its bi-annual Nigerian Development Update, the bank said the way the exchange rate was managed limited access to foreign exchange and thus adversely affected investor confidence and investment appetite.
“Significant spreads between the official, the IEFX, and the parallel exchange rate persisted throughout 2020 and as of April 2021, the spread between the official and the IEFX rate was estimated at 8% and between the IEFX and the parallel rate, reached 18% (the spread between the official and the parallel rate was 27%),” said the World Bank.