Should we trust market to fix FX puzzle? | The Guardian Nigeria News - Nigeria and World News

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Naira held firm against convertible currencies in the 1970s, trading at 62 kobo to a dollar in 1973 when Nigeria converted to naira and kobo.

But since then, it has lost 99.8 per cent of its value against the green back, the most preferred global reserve currency. That puts it in the basket of the worst-performing currencies.

Naira has gone through a debilitating history and management experimentations that have left it weaker, less of a store value but more of an unpredictable means of financial transaction. Intertwined with the sore history are a litany of policy gambits that only mirrored more of the whims of external factors than they reflected the peculiarities of the local market. At best, the templates were half-implemented or abandoned at the realisation of their inherent flaws.

Dr. Joseph Sanusi came with the Interbank Foreign Exchange Market as the country sought a more liberal FX management model. This happened when a dollar was trading on the black market for over N80/$ while the official exchange was N22/$. With such a wide arbitrage, currency trading has become the most lucrative ‘business’ in the financial circle. The CBN threatened but nothing radically different from what became the norm happened.

When Soludo assumed office, naira was trading near N130/$ but actually went up to N115/$ at some point. But he left it at N148/$. When there was a shock in FX supply during the 2008 oil price crisis, Nigeria had a sufficient buffer in the external reserves that were trending towards $65 billion to weather the storm. But then, Soludo did what had become a predictable path – he created some scarcity measures that supported devaluation.

Today, even forward-looking indices may not improve till after the elections. Political risks are on the rise; insecurity spirals out of control while infrastructure challenges persist. Amidst the illiquidity crisis, IMF, World Bank and neo-liberal economists have called for liberalisation of the FX market. Some of the arguments are that the market would reduce the market rigidities and arbitrage that have restrained capital importation.

 

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Yes but I don’t trust Nigeria 🇳🇬 as a country who is independent but acting as if we are not capable. Just bcz of of our greedyness and hatred ness we have for each other. 😡

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