….Says powerful parallel market operators must be tame
From Yinka Adeniran, Ibadan
A Professor of Economics, Professor Sam Olofin on Thursday said if the Nigerian currency, Naira must be saved from imminent collapse, the time has come to rescue it from the hands of those he described as powerful operators in the foreign exchange market.
He said the time has come like it is in other countries that believe in rule of law, to define what is legal and distinguish such from what is criminal.
Olofin gave the advise as the guest lecturer during a public lecture organized by Nigerian Economic Society (NES) themed, “Recent Developments In The Nigerian Foreign Exchange Market: Issues, Options and Way Forward”, which held at CBN Centre of Excellence Lecture Theatre, University of Ibadan, Ibadan.
According to the former President and Fellow of the Nigerian Economic Society, the government attention must be focus on the parallel or black market, adding that the country has succeeded either deliberately or unwittingly, in creating a monster that has been well protected.
Calling that the monster must be brought under control or it strangulate the Naira, the renowned economist said the parallel market powerful operators who run their business as unknown entitles that are above the law are not ghost.
He said their passion is to maximise profit and hold the market and the value of the Naira to ransome, and destroy it.
He said “Without sounding too simplistic or offering a silver bullet that would solve the seemingly complex problems in the foreign exchange market, our attention should be focused on this powerful segment of the market, the so-called parallel of black market.
“We have succeeded either deliberately or unwittingly, in creating a monster that has been well protected. It is ruthless and hardly cares about anything else other than its selfish profit motive. It is either we bring this monster under control or allow it to strangulate the Naira.
“If Naira must be saved from imminent collapse, the time has come to rescue it from the hands of those powerful operators in the foreign exchange market.
“The time has come like it is in other countries that believes in rule of law, to define what is legal and distinguished such from what is criminal. Have criminals apprehended and made to face severe consequences for their actions.”
He said further of the black market powerful forces, “As things stand at the moment, merely wishing that the ‘willing buyer and willing seller’ model would do the job would be a mere fantasy. The fact is that the parallel market powerful operators are not ghosts.
“But they seem to operate as unknown entities that are above the law, driven by their passion to maximise their profit and the market and the value of the Naira to ransom, and destroy it.
“The Naira is to be kept alive only for as long as satisfies their own objectives and motives which pursued above what is in the national interest of our collective interest.
“They have unrestricted access to official supplies sources and they are not restrained from operating in the parallel market whose activities are neither legal nor seen as inimical to the overall operations of the foreign exchange market.
“The weak and vulnerable need to be protected under the law and the weak and vulnerable Naira must be protected and prevented from imminent collapse.
“The depreciation of the Naira continues on daily basis and it appears that if appropriate steps are not taken, the Naira may be heading towards crash as the value races towards the N2,000 to a dollar mark and possibly beyond, and the unimaginable consequences this would have on the rate of inflation and the entire economy.
“The immediate issue of concern in the near and immediate future as to the way forward should be on how to put a halt to this free fall, stabilize the value of the Naira and ensure effective operation of the foreign exchange market.
“The new policy measure put in place in June 2023, still regards as its centerpiece the ‘willing buyer and willing seller’ model, in effect assuming a perfect competitive market in which forces of supply and demand would ensure the emergence of market clearing exchange rate. Also that this would stabilize tue market.
“Far from it, the Nigerian foreign exchange market is never a perfectly competitive market, and no matter how we try this market structure and all its assumptions, which may be relevant in other economies particularly developed economies, cannot be super-imposed on Nigerian Foreign exchange market.”
Earlier in his welcome address, the President of the Nigerian Economic Society, Prof Adeola Adenikinju said “the choice of the theme is apt as it is perhaps the most important issue in Nigeria today.
“From Aso Rock to the CBN headquarter, and NNPC Towers, from Marina street in Lagos to Bodija Market in Ibadan, the fish seller in Yenagoa to suya seller in Sokoto to the farmer in Markurdi, the exchange rate is on the lips of everyone. Hence, the choice of the topic for the 2024 NES Public lecture.
“The subject of foreign exchange is within the ambit of economics. The exchange rate is a price. However, for an import dependent economy like ours, it is a price that influences other prices in the economy – products, money, and factor markets. The spike in inflation in the last few months in particular has been largely driven by the exchange rate. The pass through effect from the exchange rate to other prices is quite high.
“The government, especially the CBN, has reacted to the sharp and persistent devaluation of the naira with a rash of circular and policies. At times, we worry that the effects of a particular policy have not been assessed before others are quickly thrown into the mix. This action has a tendency to add to uncertainty and the flight to safety postures of economic agents, who continue to hold dollars outside the banking system.”
