Aminu Gwadabe has also advised the Central Bank of Nigeria (CBN) to consider helping the naira by intervening in foreign exchange markets. naira interestrate remittances
of the naira’s plunge and the CBN’s subsequent call on Nigerians to stop using the greenback for speculative purposes. With the latest plunge, the naira’s parallel market exchange rate of slightly over N700 for every dollar versus the official exchange rate of N424 implies the currency may be overvalued by nearly 70%.Meanwhile, the News Agency of Nigeria report also quotes Gwadabe questioning the CBN’s decision to adjust the monetary policy rate to 13% per annum.
“Increasing the MPR contracts the supply side, it is the wrong prescription. Let’s not copy the Americans who target inflation with FED rates to curb money supply; their factors of production have been fully mobilized, ours is at less than 20 per cent and requires stimulation of the supply side,” Gwadabe is quoted explaining.
Instead of hiking the rate, Gwadabe recommended cutting the rate to 5% which he said “looks more appropriate.” Concerning the CBN’s decision to allow recipients of remittances to cash out in dollars, Gwadabe claimed this “fuels currency substitution.” Besides exerting more pressure on the exchange rate and inflation, this central bank policy “does not have a statutory backing unlike domiciliary accounts, therefore, it is illegal.”
Gwadabe also claimed that the solution to Nigeria’s currency woes “has to be psychological too” because the current “panic buying is driven more by psychology and less by economic fundamentals.”Tags in this story
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