Unified exchange rate will guarantee free flow of money —Parthian Partners

Stories by Chima Nwokoji

| Lagos

The Managing Director/Chief Executive Officer, Parthian Partners Limited, Mr Oluseye Olusoga, has said that a unified exchange rate will lead to better free flow of money and reduced arbitrage concerns in the system.

Olusoga, in an interview with CNBC Africa, however, said that unifying exchange rates is a difficult task that would require a lot of courage to achieve, because an attempt to unify the exchange rates in Nigeria would imply some level of official devaluation, despite its additional benefits.

He said, “Once the rates are harmonised, there will be 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.”

According to him, to achieve this, Nigeria should increase its daily oil production for exports and diversify into sectors such as mining to generate more foreign exchange.

He advised that the Central Bank can act as a regular market participant, trading excess dollar supply to meet demand and the laws of supply and demand would help stabilise the market.

Olusoga alluded to the former president of the World Bank Group who once said, a “slow unification process often results in no unification at all due to pushback and vested interests.”

Therefore, he believes that the unification process should be swift rather than gradual, stressing that though it may be painful, the impact might not be as severe as anticipated.

He explained for instance, that if the country were to announce a free-float exchange rate of N780 or N760 per dollar, the rate would quickly drop to around N700 to dollar 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 stabilise the market. This would allow us to shift our focus towards real production and functioning markets, presenting opportunities for everyone,” he stated.

According to Olusoga, progress has been made since the stoppage of forex allocation to Bureau de Change operators in July 2021.

“As people start to witness positive changes in the market, such as the appreciation of the Nigerian naira when oil prices drop; they will gain confidence in the functioning of the market.

“Imposing restrictions or defending the currency through measures like tightening the number of items or maintaining subsidies hampers market efficiency and fair distribution of resources,” he observed.

Speaking on the impact of the World Bank’s recent $800 million loan to Nigeria to reduce the effect of subsidy removal, Olusoga said it all depends on what Nigeria does with the dollar loans.

He said, “It is more of a question of what Nigeria is using foreign-sourced loans to do. If the money is invested in job creation, healthcare improvements and infrastructure development, it will have long-term positive effects on the Nigerian economy. The focus should be on sustainable growth, rather than merely using the funds for salaries and debt servicing.”

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