Naira: Economists express support for forex flexibility, economic diversification


Two economists on Thursday urged the Federal Government to diversify the economy by reducing its dependence on crude oil and promote foreign exchange flexibility to forestall further naira depreciation.
They said in Lagos that the continued fall in the price of oil at the international market and the depletion of the nation’s foreign reserves were impacting negatively on the naira.
Prof. Anthony Monye-Elmina, Head of Department of Economics, University of Benin, said there were macro- economic challenges affecting the movement of the naira at the international market.
Monye-Elmina noted that the dwindling fall in the price of oil, coupled with the strong demand for foreign goods was putting undue pressures on the naira, leading to loss of value.
The economist said that until the nation’s economy made a paradigm shift away from oil dependence, its needed restructuring would remain a mirage.
According to him, the manufacturing sector should be revitalised to produce the needed foreign exchange that would defend the naira against the dominance of the dollar.
“Our strong demand for foreign goods and the dwindling commodity oil price were exerting pressures on the naira, leading to its’ continued depreciation.
“We also need to depend less on importation and encourage the growth of the manufacturing sector,’’ Monye-Elmina said.
In his view, Dr Chijioke Mgbame of the Department of Accountancy, University of Benin, blamed policy somersault and recurring leadership crises for the posture of the naira.
Mgbame urged the apex bank to allow market forces to determine its movement at the foreign exchange market.
According to him, the government should put in place policies that will discourage importation and encourage local manufacturing, stating that this will help to grow the nation’s foreign reserves.
He said that the scarcity of the greenback was a temporary measure aimed at restoring sanity to the forex market.
The accountant, however, urged the apex bank to pursue policies that would not impute hardship on the economy.
“When your foreign reserve is strong, it will lead to a stronger currency.
“The nation should frown at over dependence on importation and formulate policies that would encourage the growth of local manufacturers,’’ Mgbame said.
Since the closure of the Retail Dutch Auction System (RDAS) by the apex bank, and subsequent policies aimed at rescuing the naira, it has continued to depreciate.
The dwindling price of oil at the international market and the depletion of the nation’s foreign reserves have increased the burden on the naira.
Subsequently, the naira depreciated to a record low of N280 to the dollar in the previous week before rebounding to about N270 at the parallel market. (NAN)

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