Nigeria’s Central Bank Says It Considers Floating the Naira, Criticizes Recent Interest Rate Rise – Bitcoin News

Alhaji Aminu Gwadabi, President of the Nigerian Federation of Exchange Offices, said the Central Bank of Nigeria should stop the fixed exchange rate regime and allow the naira to float freely against major currencies. The leader also criticized the recent adjustment of the central bank’s interest rate to 13%, which he said may have a negative impact on the underperforming Nigerian economy.

The central bank asked to intervene to save the naira

The head of the Nigerian Federation of Exchange Desk Operators, Alhaji Aminu Gwadabi, has urged the country’s monetary authorities to consider allowing the local currency to float freely against the US dollar. According to Gwadabi, doing so will help prevent further depreciation of the naira.

In an interview with the News Agency of Nigeria, Gwadabe is also quoted Advise the Central Bank of Nigeria (CBN) to consider intervention in foreign exchange markets. He reportedly said:

The Central Bank of Nigeria should simultaneous massive dollar intervention in the open market which can inspire confidence in the naira and lead to the current collapse. Once there is a significant positive movement, the market will react and, in all likelihood, trigger an avalanche of panic selling and increase the strength of the naira.

Gwadabi also reportedly said that the Central Bank of Canada can still make a profit by buying back dollars in the open market.

Comments made by Gwadabi, whose organization members have previously been accused of fueling the currency’s free fall in parallel forex markets, came after recent reports of the naira’s plunge and the Central Bank of Nigeria’s subsequent call for Nigerians to stop using the US currency for speculative purposes. With the recent drop, the naira parallel market exchange rate of just over N700 per dollar against the official exchange rate of N424 means the currency could be overvalued by nearly 70%.

Exchange of remittances in dollars presses the naira

Meanwhile, the News Agency of Nigeria report on Gwadabi conveyed his doubts about the Central Bank of Nigeria’s decision to adjust the monetary policy rate (MPR) to 13% annually. According to Gwadabi, the adjustment is likely to have a negative impact on the underperforming Nigerian economy.

“Increasing supply-side MPR is a wrong recipe. Let’s not copy inflation-targeting Americans at Fed rates to rein in the money supply; their factors of production are fully mobilized, our factors of production are less than 20 percent and require supply-side stimulation.”

Instead of raising the price, Guadabe recommended lowering the rate to 5% which he said “seems more appropriate”.

Regarding the decision of the Central Bank of Nigeria to allow recipients of cash transfers in dollars, Gwadabi claimed that this is an “alternative fuel for currency”. Besides putting more pressure on the exchange rate and inflation, this central bank policy “does not have legal backing unlike domestic accounts, and is therefore illegal”.

Gwadabi also claimed that the solution to Nigeria’s currency problems “must also be psychological” because “panic buying is driven more by psychology rather than economic fundamentals.”

Register your email here to get a weekly update of African news sent to your inbox:

What do you think of this story? Tell us what you think in the comments section below.

Terence Zimoara

Terence Zimoara is a Zimbabwean award-winning journalist, author and writer. He has written extensively about the economic problems of some African countries as well as how digital currencies can provide Africans with an escape route.

photo credits: Shutterstock, Pixabay, Wikicommons

disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services or companies. It does not provide investment, tax, legal or accounting advice. Neither the Company nor the author shall be liable, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

اترك تعليقاً

لن يتم نشر عنوان بريدك الإلكتروني.

زر الذهاب إلى الأعلى