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Former CBN deputy governor advocates caution on naira free float

Lemo stated that floating the naira amidst a balance of payment deficit and low reserve is the wrong strategy

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Dr. Tunde Lemo, a former Deputy Governor of the Central Bank of Nigeria (CBN), cautioned against the immediate adoption of a free-floating naira. His remarks came during an online discussion at the Boiling Point Arena on Sunday, focusing on the theme, ‘Persistently unstable macro-economic environment: Any way out.’

Lemo argued, “Naira should not be floated today. How many currencies are on free float in the world? Apart from the currencies that are internationally convertible, the dollar, euro, and maybe Japanese yen Even the Chinese Yuan is managed. Why would anybody just say that we should free up naira when we don’t have the reserve level, when we have trade and balance of payment deficit? I think that is a fast way to suicide.”

Highlighting the need for strategic measures, Lemo emphasized that the Central Bank must address the backlog in the foreign exchange market to restore confidence and strengthen the naira’s value.

He stated, “One other thing that they need to do is that the new team at the central bank needs to restore confidence in the currency market. All these, while they are issuing circulars, banning this product, and so on, and there is no clarity about the market dynamics, all of these mean that the participants in that market will not be rational, and once confidence is lost, how do you bring it back? They have been defaulting. Most of the commitments have not been met. You know there is a backlog of about $6.8 billion of swap deals, forward deals, commitments by airlines, and so on that are not met. They need to clear all of this to bring confidence back into the market.”

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