Yemisi Izuora-Calabar
An economist, Bismark Rewane has asked government to remove oil subsidy to make foreign exchange rate policies be effecient on the economy.
Speaking today on the Evolution of the foreign exchange market in Nigeria and the way forward at the 20th seminar organized by Central Bank of Nigeria (CBN) for Finance Correspondents and Business Editors in Calabar, Cross Rivers, Rewane said that the removal would make the CBN monetary policies be immediately felt by the nation.
He explained that if the country does not deal with the fiscal spending on subsidy, any move on currency reform will be erroneous adding that Nigeria has a currency crises and that poor timing of currency adjustments have prolonged the crises.
He stressed that fuel subsidy constitutes 30 percent of Nigeria’s import bill and that if removed the country can save more money in foreign reserves.
Rewane, however said the impact of the economy adjustment would be more painful, if subsidy is not removed and that it is not only the removal of oil subsidy that is necessary but government should consider structural adjustment otherwise the naira would continue to ‘suffer’.
According to him, once that is done, the actual price of the naira would be determined and then the exchange rate will be brought down making the currency adjustment minimal.
He however added that failure to embark on oil subsidy removal could erode the gains to be benefited from all the exchange rates policies being implemented by the CBN.
He said that the CBN’s movement away from the Wholesale Dutch Auction System (WDAS) to Retail Dutch Auction System (RDAD) and later the closure of the interbank market to control the forex market was a good judgment.
Rewane said that the CBN’s decision showed that the move was to ensure that the exchange rate was being determined by the market forces.
The economist, therefore, urged CBN to look into considering a device whereby the market continually determine the exchange rate rather than the bank fixing it.
He added that exchange rate should not be seen only as a medium for import but for the optimization of the nation’s economic arrangement and that another adjustment of the naira is imminent, if fuel subsidy is not removed.