Nigeria cannot adopt a freely floating exchange rate system now given the perculiar challenges the country is facing, the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, has said.
Emefiele told journalists in an interview at the ongoing IMF/World Bank Spring Meetings in Washington DC, United States of America, that adopting such a policy would lead to foreign exchange spiral for Nigerians.
“What that means is that we cannot adopt a free floating system. Doing that will create an exchange rate spiral for Nigerians as long as the demand surpasses supply of FX in Nigeria,” he said.
Emefiele was responding to calls by the World Bank President Mr. David Malpass, who had on Wednesday asked Nigeria to unify its multiple exchange rates.
“Yes they want us to freely float the exchange rate and you do know that this will have some impact on the exchange rate itself in the sense that when you allow that to happen, you will have some uncontrollable spiral in the country’s exchange rate,” the CBN governor said.
He explained that what the central bank has been doing was to ensure that, “even as we run the managed float, there should be some interventions put in place to really control exchange rate”.
“We have been at this since 1986. That is why we are saying that whereas we are doing something to adjust the currency, for example between 2015 and now we have adjusted the rate from.N155 /$1 to N410 -420/$1.that it is today.
“So we cannot be accused of not adjusting the currency. We have to be given the time to ensure that while we are looking at the exchange rate, we have to do something about demand and supply.
Emefiele further explained that the CBN has been “doing everything possible to restructure the base of the economy through some of the policies that we have put in place to deepen the production of goods in Nigeria.”
“We are trying to adopt a gradual approach to make sure that those things that we can produce at home are produced at home instead of importing them,” he said.