Naira depreciation: Expert demands reforms to tackle FX abuse

BY TEMITOPE ADEBAYO

To strengthen the Naira against foreign currencies, especially the United States dollar, a financial expert, over the weekend, called on the government to immediately come out with new reforms, regulatory frameworks and guidelines for the nation’s foreign exchange market.

Speaking on a radio programme monitored by our Correspondent, Samuel Showunmi, a Capital Market Executive at Iron Global Markets Limited, on the short and long term solutions to solving depreciation of the Naira, said, operators are taking rules into their own hands because of absence of FX regulatory guidelines.

According to him, “When laws come in, people will understand the dos and donts regarding their activities in the foreign exchange market.

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“There are no simple or quick fix measures. The measures must be a consolidation of different strategies and policies. The government must quickly come out with FX reforms policy and I know that the Central Bank of Nigeria (CBN) is working on a new regulatory framework for the FX market. But I will want to advise that we don’t delay too much because delay can be dangerous.

“Currently, what it means is that we don’t have any FX regulatory guidelines in place so people are technically taking the rules into their hands and doing whatever they like. But when laws come in, people will understand the dos and donts regarding their activities in the market. Also, CBN will start their surveillance, monitoring and enforcement.

“I think the CBN is smart because in the last few weeks, it has been moving some of its key departments to Lagos. It’s a strategic move and I think market operators should be aware of this because it’s a move that is tilting towards CBN trying to move closer to the market. That tells us that the reforms and guidelines will soon come out and when the guidelines are out, the CBN will be closer to the market and surveillance, monitoring will follow, then enforcement.”

“That is smart, but I will advise that we don’t delay the regulatory framework. It should come out on time especially now that they have moved base to the theatre of operations and trying to set things in place, which is a very good one. This means CBN is prepared and they know what to do and that will address some of the issues we are currently experiencing in the short term,” Showunmi stated

He explained that, on the long term, government should increase tax base by capturing so many Nigerians in the tax net.

He urged Nigerians to continue to patronise locally made goods, saying huge disparity between Naira and Dollar fuels poverty and widens the inequality gaps.

“In the long run, it’s for us to concentrate on those activities that will sustain the supply side. Like I said, keep the oil production level up and if we can not meet up to the quota, let’s sustain the current level, we shouldn’t go down on the current level.

“On the fiscal side, we must come out with reforms that will support such moves and that’s tax tariff and regulations. On the tax side, we must look at increasing government revenue by increasing the tax base and not the tax rate.”