The Governor of the Central Bank of Nigeria (CBN) Mr. Godwin Emefiele, has explained why Nigeria cannot freely float the Naira at the foreign exchange market.
He said in an interview, Thursday, on the sidelines of the on-going IMF/World Bank Spring Meetings in Washington DC, United States of America, that such a policy would lead to foreign exchange spiral for Nigerians.
His words, “What that means is that we cannot adopt a free floating system. Doing that will create an exchange rate spiral for Nigerians as long as the demand surpasses supply of FX in Nigeria.
“We have been at this since 1986. That is why we are saying that whereas we are doing something to adjust the currency, for example between 2015 and now we have adjusted the rate from.N155 /$1 to N410 -420/$1.that it is today.
“So we cannot be accused of not adjusting the currency. We have to be given the time to ensure that while we are looking at the exchange rate, we have to do something about demand and supply.
“We are trying to adopt a gradual approach to make sure that those things that we can produce at home are produced at home instead of importing them.
“That means that the demand for FX will reduce and the currency will be better priced to meet the expectations of Nigerians.
” We restricted access to FX for rice. No more rice importation. Even maize. The importation of wheat has also reduced significantly.
“When Dangote Refinery begins operation towards the end of the year, it will end the demand for FX for the importation of Petroleum products.
The demand for Petroleum products and some food items account for as much as 40 per cent.
When the Petroleum products and these food items are produced locally, the demand for FX will drop and we can apply the available FX to meet the demand. That way, we will achieve a stable exchange rate.”