The Association of Bureaux De Change Operators of Nigeria, ABCON, has warned that the persistence of multiple exchange rates is causing distortions and widening rent seeking opportunities in the economy.
ABCON gave this warning in its Quarterly Economy Review for the first quarter of the year (Q1’22), expressing concerns over the inability of the fiscal and monetary authorities to address the wide parallel market and multiple exchange rates in the country.
The Association said: “A premium is the outcome of market restrictions that drive the non-official supply and demand for foreign currency which is a symptom of the inconsistency of fiscal and monetary policies. It also shows lack of credibility of exchange rate policy given the level of foreign reserves.
“That fiscal and monetary policies in Nigeria cannot curtail the premium that rent seeking dealers in foreign exchange, that is banks and other intermediaries, is worrisome and highly contributory to the distortions in the economy.
“Multiple exchange rates cause distortions by manipulating relative prices in the economy and widens opportunities for rent-seeking behaviour for those who have access to the lower exchange rates. When the multiple exchange rates are corrected, it would promote a more efficient application of market-driven relative prices to allocate resources in the economy.”
The Association also highlighted the nation’s huge public debt and increasing level of poverty, recommending that the Federal government should reconsider its strategy of depending on debt to grow the economy.
“The Nigerian economy is currently faced with two major interrelated problems: heavy indebtedness and the incidence of poverty. Together, they have important implications for growth possibilities,” ABCON said, adding that, “it’s high time the FG reconsidered her current strategies of total dependence on debt for the survival of the economy otherwise it may run the country to a comatose state coupled with the high and uncontrollable incidence of insecurity in the nation. Inability to address the problem of increasing poverty will necessarily fuel crime and insecurity.”
On the way forward, the Association recommended the need for a common understanding on the problem by all stakeholders, and agreement on a set of coherent policy responses from a wider development perspective, to complement all current approaches.
“The situation in Nigeria has been longer-term situations relating to structural, financial and transfer-of-resources problems requiring appropriate medium to longer-term measures. These should commence with:
“Transparency and accountability in operations: lack of transparency and accountability can exacerbate financial weakness at the firm and national levels and complicate efforts to resolve crises;
“There must be medium to long term economic structural plans to redirect the economy from a totally import dependent to a foreign exchange earning one. And also from a crude oil based economy;
“Rapid employment opportunities for the youth through the introduction of modern agricultural development processes.”