Categories: AFRICALatest

Moghalu Says Lack of Philosophical Grounded Economic Policy Cause of Nigeria’s Currency Fall

A former deputy governor of Nigeria’s Central Bank, Kingsley Moghalu has said the country’s currency – the Naira – keeps falling in value because handlers of the Nigerian economy is pursuing an economic policy that is not grounded in any clear philosophy.

Moghalu, a professor of International Business and public policy stated this when he featured on ARISE News Morning Show and noted authorities are yet to get right the balance between the state and the market place.

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Nigeria’s central bank in December 2020, weakened the local currency to a record low during trading at the investors and exporters market.
The Naira at the time closed at 410.25 Naira per dollar at the I&E window, according to the website of the Lagos-based FMDQ OTC Securities Exchange, a platform that oversees foreign-exchange trading in Nigeria.
Bloomberg reports that at on the spot market, Naira traded for 400.25 to the greenback as of 3:25 p.m. in Lagos. The naira sold for 470 per dollar on the street since Tuesday, according to abokifx.com.
Both the International Monetary Fund and the World Bank have intensified calls on Nigeria to speed up currency reforms in order to achieve economic growth.
But Prof. Moghalu told ARISE News that “the Naira keeps falling in value because we are pursuing an economic policy that is not grounded in any clear philosophy. We have not yet been able to get right the balance between the state and the market place in Nigeria, and that is why despite Nigeria crawling with brilliant economists, our economy keeps going backwards.”

According to Prof. Moghalu, “the Naira’s problem is that the central bank is trying to control the price of the Naira in the market and it is subsidising, in fact, the Naira is on steroids from forex interventions in the banks and this is bringing down our foreign reserves level significantly.

“When the market itself perceives that the actual value of the currency vis a vis foreign currencies is subsidised, a massive parallel market will naturally develop and investors will have hesitation in investing in the Nigerian economy and there will, in fact, be a lot of capital flight.

“I have advocated that the Naira should be valued on the basis of a market-determined flexible exchange rate, you can put in a very simple way, float the Naira. It’s a controversial proposition, but I say that it is better than what we are going through and it will yield results that are positive for Nigeria if it is planned properly and executed properly.

“You do not just continue to devalue the Naira without reforming trade policies. You have to float the Naira to create an incentive for exports to earn foreign exchange, right now so long as the Naira continues to be subsidised, you are creating an incentive for an import-dependent economy which is what Nigeria has been for the past 50-years.”

By Abel Ejikeme

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