A former Deputy Governor of the Central Bank of Nigeria, Kingsley Moghalu, says the value of the naira will fall from N570/$1 to N400/$1 at the parallel market if there is a massive rush of dollars into the Nigerian market through export earnings.
Moghalu made this known to Newsmen on Thursday.
He said, “The reason we have the prices we have is that the official rate is perceived by the market not to be the real rate; that’s the fundamental reason why you have a huge gap of N410 at the official rate – Investors and Exporters’ Window – and then N570 in the black market. That is unbelievable.
“Normally, you will have a gap between the official rate and the parallel market but in our time, we made sure that that gap was not a lot – it wasn’t more than N10, N15, max N20.
“What is happening now shows that there is a very fundamental crisis in the Nigerian economy. And unfortunately, the economy does not respond to political commands, the economy does not respond to political statements, the economy does not respond to military orders; the market responds to its own dynamics – demand and supply.
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“If you have a massive rush of dollars into the Nigerian market today, the price of the dollar would crash and the naira can come to N400 in the black market, you may be shocked.
“So, it is about going to fix what would bring in the quantity of dollars that would rebalance the equation.”
‘CBN needs to gain investors’ confidence’
Moghalu, who was a deputy governor at the apex bank between 2009 and 2014, also explained how the apex bank stabilised the naira against the dollar for five years during his time at the bank, noting that the CBN must work on gaining the confidence of investors.
Moghalu had deputised Sanusi Lamido Sanusi, who was CBN Governor from June 2009 to February 2014.
Both Sanusi and Moghalu were at the apex bank during the administrations of the late President Umaru Yar’adua and then-President Goodluck Jonathan.
During the period, the naira steadied around N150/$1. However, the naira has maintained an unprecedented downward trend in the last six years since the beginning of the administration of the current President, Major General Muhammadu Buhari (retd.), and the CBN Governor, Godwin Emefiele.
The naira now trades at N570/dollar at the parallel market while it trades around N412/$ at the I&E forex window which is the only official rate recognised by the CBN.
The downward trend of the naira had fueled calls for the sacking or resignation of the CBN Governor, Godwin Emefiele, by some political groups including the Peoples Democratic Party. They blamed Emefiele, who has been CBN governor since June 2014, for poor monetary policies.
However, speaking on Thursday, Moghalu blamed the downward trend of the naira on the activities of speculators and the lack of autonomy of the apex bank.
‘Apex bank not autonomous’
When asked how he and Sanusi stabilised the naira against the dollar for years, Moghalu told PUNCH Live that the apex bank worked on investors’ confidence during the period.
The CBN ex-deputy governor, however, lamented that the CBN has lost its autonomy to the political class and has little or no investors’ confidence.
According to the former presidential candidate of the Young Progressive Party in the 2019 election, the government of the day does not respect the independence of the CBN and it becomes a choice for whoever is the governor whether to play along or assert his or her independence and bear whatever cost given the kinds of political leaders that are in the country.
The PUNCH had earlier reported that the CBN in July stopped selling forex to Bureau De Change operators and asked legitimate travellers to approach the banks to access cheap forex but the banks have been inundated with fake demands.
Emefiele had said that the BDCs defeated their purpose of existence to provide forex to retail users and had become wholesale and illegal dealers.
Asked whether the stoppage of forex sales BDCs was the cause of the downward trend of the naira in recent weeks, Moghalu said the CBN should not have sold FX to the BDCs in the first instance.
“A Central Bank supplying foreign exchange to BDCs is very odd, Nigeria must be the only country or one of the very few countries that does that. It is only part of the wider problem.
“Statism is killing the Nigerian economy, the government interferes too much in the market and in that process, distorts the markets and the Nigerian citizen suffers,” he said, adding that the sale of FX to the BDC encourage hoarding, roundtripping and exploitative tendencies by those who do not need FX but who have access to it.
He also said that the presidential order directing the CBN not to release money for food importation including heavily consumed commodities like milk was part of the problem of the rising demand for forex because the country does not produce sufficient milk whereas there is a high demand for the product amongst Nigerians.
Continuing, Moghalu said that by pumping more forex into the market, the CBN is depleting the foreign reserves of the government, noting that economic diversification and exportation were the way out of the FX crisis.