Begin process to restore international acceptance for Naira, Ex-CBN boss tells FG

Dr Obadiah Mailafia
  • MAN: 14% Lending Rate Too High To Stimulate Growth
  • As Eko Disco announces 5-day power outage in Lagos

A former Deputy Governor of Central Bank Of Nigeria (CBN), Dr Obadiah Mailafia, has called on the Federal Government to take measures that will make Naira convertible international trading currency.

Mailafia stated in Abuja on Monday.

He recalled that about 40 years ago, Naira was accepted abroad for trading and other purposes.

“In the 70s, Nigerians were spending Naira in London. It was accepted.

“In fact, our Muslim brothers used to go to Mecca and Medina that time and they could spend and buy goods with Naira.

“The situation has changed that even in Benin Republic, they don’t accept Naira.

“We need to restore the purchasing power, the honour and dignity of the Naira as our proud currency and the symbol of National honour,’’ he said.

Mailafia, therefore, urged the government to begin the efforts that would shore up the value of the currency so that it could be acceptable internationally in the next decade.

He called for strengthening of the Naira, adding that vigilance should be exercised not to allow fake currencies, including the Naira, to enter the country.

According to him, monetary authorities in the country need to be more vigilant because there is a law of finance that says bad money always chases away good money.

“It is like a computer virus, you put one virus, it can wipe off all good data you have and this is what happens with fake currency.

“Once it enters the system, it begins to infect the whole monetary and financial system.’’

In addition, Mailafia advised that the CBN should earn the trust of Nigerians by being transparent the way it operated foreign exchange market.

“The CBN should be transparent on its implementation of monetary policies and the way it supervises commercial banks.

“ This will catalyse commercial banks to do what they are expected to do to restore this economy,’’ he said.

He further said that restoring the Naira also meant to diversify the economy and diversify the country’s export base.

“When you do that and diversify the sources of revenue and income, it eases pressure on domestic currency so it will continue to be strong.

On foreign exchange policy, the former CBN boss said that some analysts had advised the government to change the new policy in order not to deplete the country’s external reserve.

“The CBN, in the policy, said that in order to ease the difficulties encountered by Nigerians in obtaining funds for foreign exchange transactions, it would henceforth be providing direct additional funding to banks.

“This is to meet the needs of Nigerians for personal and business travel, medical needs and school fees effectively.

“The CBN said such retail transactions will be settled at a rate not exceeding 20 per cent above the interbank market rate.

“We cannot continue to do this forever without depleting the external reserves; if you deplete the external reserves, in fact, the Naira can fall to 1,000 to a dollar.

“We should have a deliberate policy of working toward unification and integration of multiple exchange rates into the law of one price, so that there will be clear transparency in the system.

“It might involve going back to the Dutch option system that we had sometimes ago which did well, by the way,’’ he said.

Dutch option is a public offering auction structure in which the price of the offering is set after taking in all bids and determining the highest price at which the total offering can be sold.

In the type of auction, investors place a bid for the amount they are willing to buy in terms of quantity and price.

In the meantime, the President, Manufacturers Association of Nigeria (MAN) Mr Frank Jacobs has urged the Central Bank of Nigeria (CBN) to reduce the current lending rate 14 per cent, if it’s orchestrated desire for accelerated productivity and economic growth would be timely realized.

Mr Frank Jacobs indicated this on Sunday, in Lagos pleading that the apex bank’s Monetary Policy Committee to review the lending rate downward at its meeting slated for May 22 and 23.

Jacobs posited that the current CBN high interest rate of a 14 per cent lending rate to commercial banks since July 26, 2016, instituted in its bid to check inflation and stimulate economic growth, had stifled growth, productivity and competitiveness of manufacturers; and noted that with the appreciation of the naira and further drop in inflation rate, friendlier policies that would stimulate economic growth and boost production should be embraced.

He tasked the apex bank to create five per cent concessionary interest rate for manufacturers to drive the nation’s diversification agenda and increase contribution to the Gross Domestic Product.

“If manufacturers have access to low interest rate as done in other climes, we will be able to employ more people and create wealth for the nation through tax,” he indicated further, stressing that with concessionary interest rate, manufacturers would actually be able to expand their businesses, create wealth, boost productivity and catalyse economic transformation.

In another development, electricity supply would be disrupted in many parts of Lagos this week as Eko Electricity Distribution Company on Monday announced five days power outage in the city.

EKEDC spokesman, Godwin Idemudia, said in a statement that the outage would affect Ikoyi, Victoria Island and parts of Lagos Island from Wednesday to Sunday.

Idemudia said that the outage was to enable maintenance crew from the Transmission Company of Nigeria address technical and maintenance issues at Alagbon transmission station.

“We want to inform our esteem customers that from Wednesday, May 24 to Sunday, May 28, there will be an outage within Ikoyi, Victoria Island and parts of Lagos Island.

“This is to enable TCN maintenance crew to resolve some technical issues within Alagbon transmission stations,’’ EKEDC said.

The EKEDC spokesman said that the company highly regretted any inconveniences caused by the five-day outage.
He promised that supply would be restored to the affected areas as soon as the maintenance was successfully completed.