As the Naira continues its free fall in the foreign exchange market, Nigeria’s Vice President, Prof. Yemi Osinbajo, has advised the Central Bank of Nigeria (CBN) to adjust the naira exchange rate “to be as reflective of the market as possible to boost supply.”
The stance of the VP is in contrast to that of President Muhammadu Buhari, who has, in the past, objected the adjustment of the naira.
In a swift reaction, financial analysts have cautioned that the already battered Nigerian economy could further be damaged if the suggestion of VP Osinbajo was adopted.
The experts, who spoke with THISDAY, however, advised the Buhari-led government to focus on improving local production and export, as this could solve the current foreign exchange challenges.
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WHAT THIS MEANS:
- The current exchange rate was a direct result of the country’s inability to boost local production and increase exports to strengthen the local currency.
- The first casualty of the Naira devaluation would be the 2022 appropriation bill. If the naira is pegged at N410.15 per dollar, it would be impossible to fund the budget.
- Osinbajo’s statement is capable of triggering panic buying and speculation in the forex market (official and parallel) and further complicating things for the CBN.
- Also, the VP’s stance that the devaluation would incentivise local investors was questionable, as other variables, particularly, insecurity also acted as a disincentive to capital inflow presently.
- The devaluation would force down the volume of imports and reduce the pressure in the forex market temporarily.
Osinbajo’s position came as the President of the African Development Bank Group (AfDB) Dr. Akinwumi Adesina, stated that Nigeria requires $15 billion annual investments on infrastructure to bridge the huge infrastructure gap in the country.
