A former Deputy Governor of the Central Bank of Nigeria, Dr. Tunde Lemo, has cautioned against allowing the Nigerian naira to float freely.
He expressed this viewpoint during an online discussion at the Boiling Point Arena, addressing the issue of a persistently unstable macro-economic environment. Lemo emphasized that the naira should not be subjected to a free float, citing the scarcity of currencies worldwide that follow such a system.
He pointed out that, except for internationally convertible currencies like the dollar, euro, and perhaps the Japanese yen, even the Chinese yuan is managed rather than freely floating.
Lemo argued that advocating for the naira’s free float in the absence of sufficient reserves and with trade and balance of payment deficits would be a reckless move, akin to economic suicide.
He stressed that the Central Bank must prioritize clearing the backlog in the foreign exchange market to rebuild confidence and bolster the value of the naira.
Furthermore, Lemo emphasized the need for the new leadership at the central bank to instill confidence in the currency market. He pointed out that issuing circulars and implementing various bans without providing clarity on market dynamics can lead to irrational behavior among market participants.
Restoring lost confidence becomes challenging once it erodes, and there are existing commitments, such as approximately $6.8 billion in unmet swap deals, forward deals, and airline commitments, that need to be addressed to reestablish trust in the market.
