Financial experts have identified the uniformity of foreign exchange (forex) in Nigeria as a major factor that would help tackle issues associated with naira instability and create employment opportunities for people.
The experts, who spoke in separate interviews with The Guardian on how the unification of forex rate in Nigeria and the African Continental Free Trade Agreement (AfCFTA) would spur nation’s economic growth, insisted that countries with multiple exchange rates have lower growth with high rate of inflation.
According to them, with the signing of the AfCFTA by Nigeria, unifying the exchange rate would go a long way to stabilise the currency, grant Nigerians easy access to African markets and subsequently create more jobs for the people.
Specifically, a professor in the Dept of Business Law, College of Law, Igbinedion University, Okada, Professor Nat Ofo said having a unified foreign exchange would help to stabilise the naira, noting that nation’s currency is currently in a weaker position when compared to other African currencies.
He pointed out that a more flexible exchange rate in a reform scenario in Nigeria could have a multiplier effect on the nation’s GDP and boost the economy.
“The AfCFTA initiative is a good one if African leaders have the determination and commitment to see it through and if they will receive the cooperation of the Western world. Unified foreign exchange rate will help to stabilise the naira particularly our foreign exchange because it is currently in a weaker position compared to other African countries.
“Also in terms of market for Nigerian businesses and products, it would give Nigerians easy access to African markets and promote Nigerian industries and present an opportunity for Nigerian companies to freely market their goods and services to countries that form part of the agreement.
“It is also a bigger market for Nigeria. Nigerians will be trading favourably which would help to boost the economy. They will trade easily across African countries without restrictions because all the local barriers and stringent measures to trade would be eliminated when Africa becomes one entity.
“Now that they are not yet unified, they made laws that are stringent for Nigerians but after the unification, those restrictions would be relaxed for Nigerians. It would also enhance employment because of greater mobility of goods and services. Nigeria would have a stronger influence for such mobility.”
However, he noted that there was need for continuous advocacy from stronger African countries that understand the benefits and advantages to enhance speedy takeoff of the initiative.
“The stronger countries should convince the weaker ones and work out modalities on how to assist them through the block to ensure that they are able to become part of the block in the interest of all the countries.”
The Managing Director of Investdata Consulting Limited, David Adonri said the current exchange rates are administratively determined which is not to the benefit of the citizens.
“A lot of us have been at the vanguard that the exchange rate should be unified so that the naira can be exchanged at a particular rate. These rates currently are administratively determined which is not to the benefit of the citizens. The value of the naira cannot be said to be the true value of naira.
“We have been clamouring that the exchange rate should be market determined in line with the forces of demand and supply. It is important because, the value of currency in an economy is the function of incentives that drives the economy.
“If the price of money is not efficiently determined, it will not impact on the economy. We do not know the value of the naira currently because it is administratively determined. The market should be organized so that no single economic entity should dictate the price of naira.”
On whether it would enhance the AfCFTA, Adonri argued that the unification would promote transparency and predictability around the dealings of currency.
“The currency that the value is determined transparently by market forces will give more confidence to traders and investors that they can enter and exit freely without losing their money. So it is a mechanism that will enhance trade and give confidence to traders.”
The Chief Research Officer of Investdata Consulting Limited, Ambrose Omodion said in the history of international trade, single exchange rate facilitates easy transactions that boost balance of trade.
He added that it also reduces cost of managing exchange transactions.