Osinbajo Canvasses Better Foreign Exchange Rate Management 

* Kenyatta stresses need to carry opposition along for development 

Deji Elumoye in Abuja 

Vice-President Yemi Osinbajo has canvassed for an effective synergy between the fiscal and monetary aspects of Nigeria’s economy, as well as better management of the country’s foreign exchange rate.

This is just as the former President of Kenya, Uhuru Kenyatta, stressed the need for African leaders to carry opposition parties along in their quest to develop their countries.

The duo spoke Monday at a ministerial retreat organised for ministers, heads of government parastatals and service chiefs, among others, which was declared open at the Conference Hall of the State House, Abuja by President Muhammadu Buhari.

In his presentation titled ‘The Buhari Administration: Reflections on the Journey So far’, the vice-president who outlined some of the game-changing achievements of the federal government, said there are some areas of concern in the economy.

According to him, “The first is the synergy between fiscal and monetary policy. The failure of that synergy has led to unnecessary drawbacks in our economic performance and planning. What imports are eligible for foreign exchange must agree with the fiscal ambitions for manufacturing and industry.

“Currently, such decisions on import eligibility for foreign exchange for instance is being taken solely by the monetary arm, although fiscal arm would normally be expected to lead in such matters.”

Osinbajo further said: “Our exchange rate management continues to be an issue.  The exchange rate of the naira to convertible currencies continues to face significant downward pressure because demand substantially outstrips supply. 

“That is just the reality. On one hand we have tried demand management and rationing, which has not really worked because fixing the price while the parallel market reveals a massive arbitrage merely creates the opportunity for massive rents. 

“It will also compound the backlog of remittances for foreign businesses who want to repatriate their earnings. The discussion that we must now have and going forward is how best to manage the situation by finding a mechanism for increasing supply and moderating demand which will be transparent and will boost confidence. 

“I think that a more market-driven approach will be best, some price discovery within the context of a managed float is certainly required. Some efforts at controlled price discovery that had been made in the past include the Foreign Exchange Market (FEM), Interbank Foreign Exchange Market (IFEM), various iterations of the Dutch Auction System. (DAS), Wholesale Dutch Auction System (W-DAS) and Retail Dutch Auction System (R-DAS).  

“While they may not have been perfect, it would appear as if the rules were clear and there was relative stability.  When  people know how they can access foreign exchange competitively, this will boost confidence and inward flows will increase.”

The game-changing achievements of the Buhari administration that the vice-president enumerated included the development of infrastructure “with the creativity we have introduced to infrastructure financing”.

He also spoke about the success of the Socially Investment Programmes and the improvements in generating capacity in the power sector and the Solar Power Naija which is in the process of providing off-grid power to about 20 million Nigerians. 

He also spoke about the progress in digital economy with the sector contributing over 18% to GDP in the second quarter of 2020, almost three times the oil and gas contribution.

Reflecting on the journey so far,  Osinbajo counseled against placing a blanket ban on imports, giving the negative consequences it can have on the economy including on raw materials.

He said importation is not the problem of the economy as he noted that many manufacturing countries are heavy importers that import much more than Nigeria.

Delivering a keynote address at the retreat, former Kenyan President, Kenyatta, stressed the need to carry the opposition along for a peaceful and progressive country. 

Drawing from his example in Kenya, he said countries in Africa have the same developmental problems, which he said must be confronted irrespective of who is in power.

According to him, what is important is continuity of programmes and succession planning.

Kenyatta also noted the current global challenges, which he said even though have nothing to do with Africa, the continent bears the brunt.

He, however, wondered how the continent would meet the challenges for its patient population within the limited time frame, saying: “First is the ability to be focused on what the critical issues are. We can’t deliver on everything but focus on those areas that affect our people and enhance unity.

“The second is that the challenges we face can’t be completed by anyone single administration. So, the issue of continuing and succession planning is very necessary.”