Soludo, who acknowledged that since November last year, the foreign exchange market had undergone series of turbulence, once again admitted that the policy of depreciation was deliberate to allow the naira adjust to reflect the key aspects of both the global and local markets, adding that the main shock absorbers that have seen the country through this turbulence are the flexibility of the exchange rate and saving of the excess crude oil proceeds by the Federal Government.
Addressing the press after a breakfast meeting with chief executives of banks in Lagos yesterday, Soludo, who spoke in a measured tone said the apex bank remains committed to a stable rate that is market determined.He also assured that CBN has enough foreign exchange to meet its external obligations, now and in the future.
Specifically, Soludo said operations of Bureaux de Change (BDCs) would be streamlined to reflect what is obtainable worldwide. He frowned at the present arrangement whereby individuals, according to him, float many BDCs with the sole aim of accessing foreign exchange from CBN.
He said BDCs as presently constituted are basically created to transact in foreign exchange from CBN alone, which he said is an aberration and does not provide incentives for growth. ‘’We are currently looking at the operations of Bureaux de Change with a view to streamlining them. A situation whereby an individual will register 100 BDCs to come for foreign exchange is not acceptable. CBN does not supply foreign exchange to BDCs elsewhere in the world and our present efforts in supplying them with foreign exchange is not a permanent feature,’’ Soludo said.
The governor also said CBN would henceforth beam its search light on the activities in the foreign exchange market to make it more effective and to ensure that genuine transactions are adequately funded to eliminate frivolous and speculative demands.
Besides, all the loose ends in foreign exchange market would be plugged with proper documentation that would require reasons for requests for foreign exchange by banks on behalf of their customers. Erring banks would be sanctioned with suspension from the foreign exchange market. ‘’I don’t think any bank can afford to be suspended from the foreign exchange market now,’’ Soludo said.
The apex bank governor expressed optimism that as soon as the nation’s currency gains the desired stability, speculators would be disappointed. His argument is that, once the exchange rate is stabilised and effective demand by dealers are met, it will not be profitable for speculators to buy and keep to sell at a future date.
Expressing confidence in the policy of liberalisation, Soludo said it has prevented the country from experiencing hardships similar to that of 1982 and 84 when the economy experienced crisis.
‘’We allowed the exchange adjustments in the last weeks to enable it adjust to global oil prices as some financial inflows have since been reduced either to capital market or foreign direct investments.
‘’Without it our foreign exchange would have been frittered away, which would have returned the country to the era of between 1982 to 1984 where there was massive retrenchments by various governments, non payment of salaries by state governments, existence of abandoned projects and the fact that there was importation of essential goods for which Nigerians were queuing to purchase.
‘’This is the beauty of flexibility of exchange rate, which has become the shock absorber now because as at today, government is still paying salaries and running government as if nothing has happened.’’ Soludo said.
The Nigeria economy has since November last year been devilled with crisis occasioned by massive depreciation of the naira, which has created crisis of confidence in the market. It also provided opportunity for speculators to make quick money, even at the detriment of the economy.
However, it got to a head on Monday when confusion almost took over the market as dealers scampered for elusive dollars which exchanged for the all time rate of N160 to US dollar.
The development led to the closure of the official market midway, prompting conflicting reports of exchange rates of between N150 and N170 to the US dollar. The situation at the parallel market was worse where the naira exchanged for between N160 to N170 to the dollar.
Indeed, the parallel market was characterised by hoarding of available stuck in anticipation that the national currency could depreciate further, leading to possible collapse of the economy.
But Soludo has allayed the fears of the general public that all the vices would soon be a thing of the past as CBN is committed to stabilising and strengthening the naira. Although, Soludo sounded desperate in his desire to sanitise the market, market watchers are of the opinion that the damage done to the economy so far is enough for a quick and decisive action on perpetrators.