Olusoga: Attempt to Unify Exchange Rate Would Imply Devaluation

Nume Ekeghe

The Group Managing Director, Parthian Partners, Mr. Oluseye Olusoga, has stated that plans by President, Bola Tinubu to unify exchange rates as a key priority for the country would in the immediate term imply some level of devaluation of the naira.

Olusoga emphasised that unifying exchange rates in Nigeria would demand considerable courage and require an official devaluation.

However, he said the benefits of rate convergence include improved flow of money and reduced arbitrage concerns.

While acknowledging the difficulty of the task, Olusoga believe it is essential for Nigeria to fulfill its potential, suggesting that a market-driven approach, rather than a gradual one, should be adopted.

Olusoga in an interview on CNBC recently, said: “Unifying exchange rates is a difficult task that must be done and would require a lot of courage to achieve. An attempt to unify the exchange rates in Nigeria would imply some level of official devaluation, however, would also bring additional benefits. Once the rates are converged, there will be a better free flow of money and reduced arbitrage concerns. However, accomplishing this task is challenging due to the rising cost of living and the need for people to adjust to the new normal. Nonetheless, I believe it is necessary for Nigeria to reach its full potential. Rather than a gradual approach, the process should be market driven.”

He added: “As the former president of the World Bank Group once said, a slow unification process often results in no unification at all due to pushback and vested interests. Therefore, the unification process should be swift rather than gradual. Although it may be painful, the impact might not be as severe as anticipated. For example, if the country were to announce a free float exchange rate of 780 or 760 Naira per dollar, the rate would quickly drop to around 700 Naira because people would stop hoarding.

“The limited number of people who have access to dollars at the current rate is worth considering. Furthermore, when prices are accurately determined, the law of supply and demand can help stabilize the market. This would allow us to shift our focus towards real production and functioning markets, presenting opportunities for everyone.”