As anxiety continues to spread over the naira’s free fall on the parallel market, the Financial Times of London has said that unless the president supports the adoption of a more market-driven exchange rate, he risks pushing the country into a deep recession.
In an editorial published yesterday, the newspaper argued that the current situation where the government is resisting calls to devalue the naira despite the fact that the shortage of foreign exchange is forcing businesses to purchase dollars on the parallel market at rates far above the official exchange rate, was not sustainable.
The Financial Times said, “Foreigners have withdrawn money and significant new inflows are unlikely until investors are convinced the naira has found a realistic level.
Mr. Buhari is leery of market solutions, believing that a devaluation would damage the poor by fuelling inflation. But in resisting a more marketdriven exchange rate, he risks forcing the economy into a deep recession that is likely to harm ordinary people even more.
“Mr. Buhari is sceptical of the view that a weaker naira can stimulate manufacturing. Nigeria, he says, even imports toothpicks.
Yet allowing the exchange rate to find a more natural level is the beginning of a solution. Instead of blocking imports through unworkable restrictions on access to foreign currency, higher prices in devalued naira terms would encourage Nigerians to buy locally manufactured goods,” the Financial Times added.
The newspaper further contended that although, “An ordered devaluation will be tricky to pull off. But it is the only way out of the current bind.
And if it catalyses a longdelayed diversification of the economy, the curse of low oil prices could turn out to be a blessing in disguise.”
