“It’s a Bad Idea:” Ex-Deputy CBN Governor Asks Cardoso to Rethink Policy, Revert FX to Emefiele Era
- Tunde Lemo, former CBN Deputy Governor in charge of Operations, has advised against floating the naira
- Lemo asked the new CBN government and his team to return to managed float of the currency
- He said the apex bank had defaulted serially on commitments, leading to a loss of confidence in the naira
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A former Deputy Governor of the Central Bank of Nigeria (CBN), Tunde Lemo, has said the decision to float the naira was wrong as only a few countries in the world float their currencies.
He advised the apex bank to return to managed float, which former Governor Godwin Emefiele implemented.
Source: UGC
Naira, not a convertible currency
Lemo revealed this in a virtual discourse at the Boiling Point Arena.
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Punch reported that the 63-year-old Lemo said the naira should not be floated because it is not a convertible currency like the dollar, euro, or the Japanese Yen, stating that the Chinese Yuan is managed.
He said:
“Why would anybody just say that we should free up naira when we don’t have the reserve level when we have trade and balance of payment deficit?
He asked the CBN to clear backlogs in the Forex market to restore confidence and boost naira’s value.
According to Lemo, the new CBN team must seek to restore confidence in the currency market, stating that issuing circulars and banning products does not provide clarity.
He stated that the development means Forex participants will not be rational.
Investors have lost confidence in the naira
He said the apex bank has been defaulting on most of its commitments, citing the $6.8 billion backlog of swap deals, forward deals, and commitments by foreign airlines that still need to be met.
On June 24, 2023, the Nigerian government announced a free float of the naira and collapsed the exchange rate windows.
Naira loses 50% of its value due to float
The new policy led to the depreciation of the naira by over 50% and caused a wide disparity between the parallel and exchange rate markets.
As of the writing, the Nigerian currency is exchanged for N773 per dollar at the official market from N460 per dollar and N1,010 at the parallel market from N710 per dollar before the exchange rate unification.
The naira depreciation has also caused a hike in the prices of items, leading to inflation, which stands at 25.8%.
63-year-old Lemo was the CBN Deputy Governor in charge of operations.
Rise in FG Debt, Forex inflows, and 8 other implications of CBN's naira exchange rates unification
Legit.ng reported that the Central Bank of Nigeria(CBN) has announced moves to float the Naira.
This policy will eventually unify the multiple exchange rates that exist in the nation.
This is coming just two weeks after President Bola Tinubu declared in his inaugural speech on Monday, May 29, 2023, his administration’s intention to unify the exchange rates.
Source: Legit.ng
