The Central Bank of Nigeria (CBN) has been urged to reconsider its decision to merge the parallel and official exchange rates by Dr. Tunde Lemo, a former Deputy Governor of CBN.
In a recent address at the Lagos Business School, Lemo argued that the naira’s lack of international convertibility should not be a cause for concern, and a gap of not more than N50 should not warrant this drastic move.
Commending the government for its audacity in merging the rates, Lemo acknowledged that the gap had created substantial arbitrage opportunities.
However, he also highlighted several factors contributing to the current situation, such as dollar scarcity, oil theft, reserve levels, previous CBN policies, outstanding trade commodities, capital controls, and overdue swaps.
Lemo said, “I advise that policymakers should reconsider merging the two rates, as the naira is not an internationally convertible currency. A gap of not more than N50 should not be a significant cause for concern for the CBN.”
Also, he addressed concerns regarding some of the government’s monetary policies, noting that achieving low-interest rates is challenging in a high and rising inflation environment.
He explained that interest rates remain high due to both monetary and structural reasons, adding that lowering interest rates is contingent on controlling inflation and addressing structural issues.
In addition to these economic considerations, the former CBN Deputy Governor called for a reduction in the country’s governance costs. Lemo criticized the Federal Government for maintaining the largest federal cabinet in 24 years, setting a detrimental example.
He suggested that the government’s intention to reduce the delegation’s size to the United Nations General Assembly was a positive step, but emphasized the need for more significant reforms at the top.
Painting a somber picture of Nigeria’s economy, Lemo stressed the urgency of implementing reforms to curb and reverse the alarming deterioration of the situation before it becomes uncontrollable.
