The Nigeria Employers’ Consultative Association (NECA) has said the Central Bank of Nigeria’s adjustment of naira exchange rate from N360/dollar to N380/dollar at the Secondary Market Intervention Sales (SMIS) will result in inflation.
The body said this in a statement released by its Director-General, Dr Timothy Olawale, at the weekend.
According to the statement, “We believe this (the rate adjustment) will be counterproductive, as the nation depends hugely on importation of raw materials, equipment, fuels (most especially). We are sure this will imply higher cost of all imported products, with increased potential for reintroduction of subsidy regime.”
Olawale added, “Though the announcement is a welcome development, the timing, however, left much to be desired” noting that “One of the challenges we observed in the management of the economy by the fiscal and monetary policy makers has been misalignment and improper timing of the policies.”
He said following the approval of the US$3.4billion via the Rapid Financial Instrument by the International Monetary Fund (IMF), which highlighted the need for the unification of the exchange rate among other measures, the move by the CBN was not unexpected.
He, however, added, “We believe that with the ravaging effect of the impact of COVID-19 on business and workers, yielding to the pressure of the IMF at this time is not a welcome development to the economy. We are aware of such proposal to other economies like Venezuela, Iran and Egypt, who are developing strategies to introduce cushioning measures for managing the impact of the devaluation or unification of the exchange market.”
While expressing support for the exchange rate unification, the NECA Director-General averred that “we are aware of the positive impact of unifying the exchange rate, as we are in full support of shunning multiple currency practices, which we believe have not demonstrated the true reflection of the naira in the market. Nevertheless, we are weary of the implication of the sudden unification of the exchange rate to the economy at this time.”
The NECA DG added, “We advocate for a gradual unification of the exchange rate, as the timing is not just right. We solicit for more cushioning measures, like expanded cash transfers to workers to boost demand, grants or low interest loans to business, before such policy can be productive to the economy.
