Why Tinubu’s Forex Policy Is Not Working– Atiku
The 2023 presidential candidate of the Peoples Democratic Party, Atiku Abubakar, said President Bola Tinubu’s economic policies, particularly the unification of the exchange rate, were hastily implemented without adequate planning and consultations with stakeholders.
These difficulties have made it hard for many citizens to afford essential goods and services.
The former vice president in a statement on Sunday said he knew that the economy of the country was heading for the ditch at the twilight of former President Muhammadu Buhari’s administration.
Atiku criticised Tinubu for not effectively presenting his administration’s measures to address the ongoing economic crisis affecting the nation.
He said, “At a meeting called at his instance on Thursday to address the foreign exchange crisis and the problem of economic downturn, among others, Bola Tinubu failed, yet again, to showcase any concrete policy steps that his administration is taking to contain the crises of currency fluctuation and poverty that face the country.
“Rather, he told the country and experts who have been offering ideas on how to resolve the crisis that he and his team should not be distracted and allowed time to continue cooking their cocktail that has brought untold hardship to the people of Nigeria.”
Atiku, who disagreed, insisted that “The wrong policies of the Tinubu administration continue to cause untold pain and distress on the economy and the rest of us cannot keep quiet when the government has demonstrated sufficient poverty of ideas to redeem the situation.”
He declared, “If the government will not hold on to their usual hubris, there are ways that the country can walk out of the current crisis.
“After a careful assessment of the state of our economy at the twilights of the last administration, I knew full well that the economy of the country was heading for the ditch and came up with a number of policy prescriptions that would rescue the country from getting into the mess that we are currently in.”
Atiku, in the statement, recalled that in his 2023 presidential election policy document “My Covenant With Nigerians,” he pledged to reform the foreign exchange market by eliminating multiple exchange rate windows, which only benefited opportunists, middlemen, and fraudsters.
The statement added, “A fixed exchange rate system would be out of the question. First, it would not be in line with our philosophy of running an open, private sector-friendly economy. Secondly, operating a successful fixed-exchange rate system would require sufficient FX reserves to defend the domestic currency at all times. But as is well known, Nigeria’s major challenge is the persistent FX illiquidity occasioned by limited foreign exchange inflows to the country. Without sufficient FX reserves, confidence in the Nigerian economy will remain low, and Naira will remain under pressure. The economy will have no firepower to support its currency. Besides, a fixed exchange rate system is akin to running a subsidy regime!
“On the other hand, given Nigeria’s underlying economic conditions, adopting a floating exchange rate system would be an overkill. We would have encouraged the Central Bank of Nigeria to adopt a gradualist approach to FX management. A managed-floating system would have been a preferred option. In simple terms, in such a system, the Naira may fluctuate daily, but the CBN will step in to control and stabilize its value. Such control will be exercised judiciously and responsibly, especially to curve speculative activities.”
He clarified that the regulation is essential because
“Nigeria has insufficient, unstable, and precarious foreign reserves to support a free-floating rate regime. Nigeria’s reserves did not have enough foreign exchange that can be sold freely at fair market prices during crises. Nigeria is not earning enough US$ from its sales of crude oil because its production of oil has been declining. And, Nigeria is not attracting foreign investment in appreciable quantities.
The statement added, “These are enough reasons for Nigeria to seek to have a greater control of the market, at least in the short to medium term when convergence is expected to be achieved.
“Tinubu’s new policy FX management policy was hurriedly put together without proper plans and consultations with stakeholders. The government failed to anticipate or downplay the potential and real negative consequences of its actions.
“The government did not allow the CBN the independence to design and implement a sound FX Management Policy that would have dealt with such issues as increasing liquidity, curtailing/regulating demand, dealing with FX backlogs and rate convergence.”
