CBN, stakeholders differ on multiple exchange rates

The Central Bank of Nigeria (CBN) has again reiterated that it does not currently have multiple exchange rates, but rather multiple exchange windows.

The Special Adviser to the CBN Governor on Financial Market, Mr. Emmanuel Ukeje, made the clarification at the Special Policy Dialogue Colloquium: “Policy Change - The Enabler of Sustainable Growth”, organised by the Financial Derivatives Company in Lagos yesterday.

Ukeje said: “We have made this clear that we don’t have multiple exchange rate, we have multiple windows.

“We have seen N340/$, and nobody has bordered to ask. Those rates are forward rates, not spot rates. If you get N340/$ at the SME window to be delivered in six Months, you are getting it at N360/$ if you put it together,” and added that it was arrangement to take care of the sectors that naturally would not be serviced by the banks.

Also speaking in defence of the multiple exchange rates, Dr. Moses K. Tule, the Director, Monetary Policy of the CBN, said between 1955 and the 2000, the advance economies for 45 years practiced multiple currencies and had the opportunities to put in place requisite infrastructure, at the same time administering a stream of other incentives to different sectors of the economy in form of subsidies.

He said the CBN put a temporary exchange rate regime that sought to achieve a short-term target to solve current problems, and that in the long run, fiscal policies would address the structural issues.

Following the signing of the African Continental Free Trade Agreement (AfCFTA) by the Nigerian Government on July 7, 2019, economic experts and business leaders have called for policy change to unify exchange rates between the CBN and the open market to provide a resolution to the problems associated with the country’s multiple exchange rates.

The colloquium presented a rare opportunity for key decision makers across different industries in Nigeria, including the presidency, to engage in constructive and interactive sessions, encouraging the use of the AfCFTA provisions to fix the country’s exchange rate problems.

The session urged stakeholders to advocate for greater market determination and use of a single exchange rate for the naira.

In his opening remarks, Bismarck J. Rewane, Managing Director/ Chief Executive Officer of Financial Derivatives Company (FDC), said, “Greater trade can trigger deep structural change by increasing production efficiency and spreading knowledge and technologies across countries. In this case, Nigeria needs complementary structural reforms that can boost efficiency in sectors where we have competitive advantage.”

Rewane also made a strong case for a unified exchange rate regime to jump start the economy.