The President and Chairman of the Board of Directors of the African Export-Import Bank (Afreximbank), Benedict Oramah, has said that the choice that was made by the Nigerian government to free the market was the right decision to make as the state of Nigeria’s economy called for it.
The banking guru said this in an exclusive interview with ARISE NEWS anchor, Ojy Okpe, where he also said that the best thing to do now is to stay the course as Nigeria cannot afford to pull out of this process, as that will just “postpone the evil day.”
Oramah said that the decision that the federal government had taken to free the market as related to foreign exchange was the right thing to do, but the impact was more severe due to the fact that subsidy was removed at the same time.
The Afreximbank president noted that with the state of the economy, it was important to stabilise the economy and pursue growth policies, but both should not be done at the same time as the pursuance of growth policies will further destabilise the economy.
Oramah said, “Freeing the market is the right thing to do. And the reason we’re where we are is that something that I thought we had done before we already freed it was reintroduced. The control was reintroduced and that is what we now have to find our way out of.
“We’re doing it at a time when other things are difficult. And that’s why perhaps the impact has been more severe. Two things are happening at the same time, and all reinforce the other. We also removed the subsidy on petroleum products, and because we are importing petroleum products, now if the currency devalues, it immediately impacts the price of petroleum products, which either is borne by the person on the street or by the government that tries to subsidise it in a different way.
“So that is why it looks it looks like things are really bad, and they are really bad, I’m not saying they’re not bad. Inflation is high and all that, but my advice is to stay the course, because when the economy is in the situation we have today, you know there are two things you do, stabilisation policies and growth policies. So, the first thing is to stabilise the economy and when you are stabilising the economy, you don’t pursue growth, because if you start pursuing growth policies at that time, you add fuel to destabilisation.
“So, we are at the point of stabilising the economy because they’ve taken what I think the right decision of freeing the market in both with regard to petroleum products, because in fact, there was a time, I believe, that Nigeria had no choice. In fact, that petroleum product, you people may not know, I don’t think Nigeria had a choice, it had to happen. But because it was happening at a time when they had also to deal with the exchange rate, the impact was distinct.”
Oramah was then questioned about the effect of freeing the market on the exchange rate, to which he replied, “You know, for me, exchange rates is, let me use the word, doesn’t mean anything. What matters to the markets is stability. Studies have shown instability is the volatility the markets don’t like. Because once you are able to stabilise the exchange rate at a point, prices will adjust, markets will adjust, things will return to normal. So, I believe the government, they have capable people that they have in finance, they have in central bank, who would be able to stabilise this economy.
“Right now, it’s difficult, obviously very difficult, because people are suffering, prices are rising. But they will come to grips with it, you know? It’s not by doing, in fact, if you do and pull back, you will postpone the evil day, because even now, do you have all the resources to pull back? So the work that has to be done now is to find the programme of action to minimise the social cost of adjustment.”
Ozioma Samuel-Ugwuezi
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