Expert Proffers Ways to Firm-up Naira, Hails CBN on Managed-Floating

James Emejo

The Chief Executive, Globa Analytics Company Limited, Dr. Tope Fashua, has said agriculture remained a veritable tool for strengthening the local currency. 

He said the sector has the potentials to generate the much-needed funds to make the country’s reserves much stronger.

But he also pointed out that the value of the Naira was tied to patriotism and nationalism stressing that, “a lot of the value of your currency is made up of perception actually – what do people think about the currency? If those who hold the currency don’t have confidence that currency is in trouble.”

He said the local currency remained an embodiment of the people as well as fundamental to the economy, pointing out that the US Dollar is strong partly because it is protected from losing its value.

According to him, one of the ways to boost the local currency was to stimulate investments in agricultural value chains both for self-sufficiency and exports to earn foreign exchange.

He further stressed the need to protect the local currency at all cost as well as increase demand for its usage internationally.

Fashua, who said he had never seen a single transaction done in naira in international trade argued that the, “more the demand created for a currency the stronger it gets.”

Delivering a paper titled, “The Agricultural Sector in Nigeria: Survival, Food Security and a Key Buffer for the Naira,” at the just concluded 32nd CBN Seminar for Finance Correspondents & Business Editors, themed: “Exchange Rate Management and Economic Diversification in Nigeria: The Produce, Add Value and Export (PAVE) Option,” Fashua said agriculture remained critical to resolving the country’s foreign exchange challenges.

He said the sector was fundamental to human existence adding that part of the current problems with the foreign exchange segment had a direct correlation with the defects in the agricultural value chain and, “not only with the Naira.”

He said often, inadequate agricultural production would lead to hunger and malnutrition, which will in turn spur social upheavals.

He stressed that such social upheavals are disincentives for Foreign Direct Investments (FDIs) required to beef up the country’s dollar stock.

Fashua, however, commended the central bank for its numerous interventions in the sector, particularly the Anchor Borrowers Programme (ABP) which had helped reduce the undue pressure on food import bills and the external reserves. He further urged the CBN to expand the list of items to be restricted from official forex in the interest of the economy and to boost domestic production for exports. 

He also hailed the introduction of the CBN digital currency otherwise known as the eNaira to counter the threats posed by cryptocurrency, which seeks deregulate banking and financial services to the detriment of the economy in general.

According to him, cryptocurrency had the potential to weaken the Naira and served as an invitation anarchy, “because by the time they take out the central bank, where will government get their taxes from? Government gets their taxes through the financial system.”

He praised the decision of the CBN to adopt a managed-floating regime on forex management adding that free-floating the currency would have wreaked untold havoc on the economy.

He said, “When you fix your currency and say you are going to defend currency at a certain rate. What happens is that speculators move against you, they move against your reserves and they will ensure that you empty your reserves and that means you have to drop that rate and that means they have shorted your currency. And when short your currency that means you are selling that currency and moving it to a stronger currency.”