CPPE commends unification of exchange rate
The Centre for the Promotion of Private Enterprise (CPPE) has commended the bold step taken by the President Tinubu administration to officially float the naira and allow market forces to determine the exchange rate.
This was made known in a statement on Wednesday by the Director, Dr. Muda Yusuf, that the unification of the naira exchange rate would unlock the huge potential for investment, jobs, and capital flows.
The financial expert said the new framework will allow for flexible rate adjustments making the market predictable, equitable, transparent, and sustainable.
He also added that the policy would reduce uncertainty and inspire the confidence of investors minimising discretion and arbitrage in foreign exchange allocation mechanisms.
The statement read in part, “The Centre for the Promotion of Private Enterprise welcomes the bold step taken by the Tinubu administration towards the unification of the naira exchange rate.
“The liberalization of the foreign exchange market would unlock the huge potentials for investment, jobs and capital flows. Investors’ confidence would be positively impacted.
“Meanwhile, it should be clarified that this is not a devaluation policy, but a pricing mechanism that reflects the demand and supply fundamentals in the foreign exchange market.
“It is a framework which allows for flexible rate adjustments as and when necessary.
“It is a model that is predictable, equitable, transparent and sustainable. It is a policy regime that would reduce uncertainty and inspire the confidence of investors. It would minimize discretion and arbitrage in the foreign exchange allocation mechanism.
“Rate unification does not imply that rates will be exactly the same in all segments of the market.
“The objective is to ensure that the differentials are very minimal, possibly between 5-10 per cent.”
Also, he noted the CBN should position itself for periodic intervention in the forex market, as and when necessary, to stabilize the exchange rate and prevent volatility. This should happen not by fixing rate, but by boosting supply to the extent that the reserves can support.
