The Central Bank of Nigeria (CBN) can bridge the widening gap between the official and parallel market rates if it yakes steps to address the challenge of inadequate foreign exchange supply, some prominent economists said on Tuesday.
The economic experts spoke with the News Agency of Nigeria (NAN) in separate interviews in Lagos.
A professor of Economics and Public Policy, Department of Economics, University of Uyo, who is also a former member of the Monetary Policy Committee of the CBN, Akpan Ekpo, advised the apex bank to adjust the official exchange rate close to the parallel market rate.
“What the CBN needs to do in the short and medium terms is to adjust the official e change rate close to the black market rate and thus narrow the distortion between the rates.
“In the long-term, the economy must produce/manufacture and export non-oil goods and services and earn foreign exchange for the economy.
“The economy can also add value to some goods and export the same, rather than mere packaging, assembling and bottling for local consumption,” he said.
Ekpo commended the CBN for coming up with the managed float exhange rate approach, noting that the Naira was not a convertible currency like the Pound or Dollar, hence the managed float approach was the best way to proceed.
A managed float exchange rate allows the CBN to intervene regularly in the foreign exchange market, to change the direction of Naira’s float and/or reduce the amount of currency volatility.
The economist urged the CBN to watch/monitor the market and know when to make adjustments, to narrow the gap.
Even if the gap was closed, through devaluation or a market determined approach, he said a gap would still exist in the market.
Furthermore, Ekpo expressed concern that the bulk of the foreign exchange went for importing refined petroleum products, urging the federal government to ensure that the refineries were working to save substantial foreign exchange.
Besides, advised the federal government to discourage the consumption of imported goods and services by Nigerians, through taxation, and also stop round tripping.
The Director, Centre for Economic Policy Analysis and Research, University of Lagos, Akoka, Ndubisi Nwokoma, said, “addressing the widening gap between the official and parallel foreign exchange markets would require a more efficient management of the FX market – on both the supply and demand sides.
“The multiplicity of exchange rates in the market creates room for arbitrage and thus encourages round tripping.
“Political interference in the allocation of FX to politically connected persons who then sell to end-users helps to sustain the gap in the two markets.
“Insufficient efforts in promoting Made-in-Nigeria goods as well as high levels of imported inputs for industrial production put pressure on effective demand management,” he said.
Professor of Economics at the Olabisi Onabanjo University, Ago-Iwoye, Ogun, Sheriffdeen Tella, also urged the apex bank to, in the short run, increase foreign exchange supply.
“But we have problems with reserve. So, we have to restrict some imports and encourage exports,” he said.
Meanwhile, the Naira exchanged at N417.30 to the dollar at the Investors and Exporters window on Monday, Bureau de Changeand N587 to the dollar at the parallel market (black market) according to information obtained from BDCs operating in Lagos.
The Investors and Exporters window is the officially recognised window for foreign exchange in the country. (NAN).