Yemi Osinbajo Offers Forex Solution Amid Dollar Scarcity

The Vice President, Yemi Osinbajo, has proffered solution to the dollar scarcity in Nigeria, advising for synergy between fiscal and monetary policy, amid depreciation of naira.

In a statement obtained by Prime Business Africa, Osinbajo said controlling the demand and supply of foreign exchange could better address Nigeria’s exchange rate concerns. 

Osinbajo made the comment on Monday, during his presentation at the opening of the 3rd Ministerial Performance Review Retreat in Abuja. 

He acknowledged that demand substantially outstrips supply, with effort to manage demand and ration supply failing. The VP said some price discovery within the context of a managed float is certainly required. 

“there are three areas of concern. The first is the synergy between fiscal and monetary policy. The failure of that synergy has led to unnecessary drawbacks in our economic performance and planning. What imports are eligible for foreign exchange must agree with the fiscal ambitions for manufacturing and industry.  

“The second is that our exchange rate management continues to be an issue.  The exchange rate of the naira to convertible currencies continues to face significant downward pressure because demand substantially outstrips supply. 

‘That is just the reality. On one hand we have tried demand management and rationing, which has not really worked because fixing the price while the parallel market reveals a massive arbitrage merely creates the opportunity for massive rents.” Osinbajo said at the Ministerial retreat. 

According to him, “It will also compound the backlog of remittances for foreign businesses who want to repatriate their earnings.  The discussion that we must now have and going forward is how best to manage the situation by finding a mechanism for increasing supply and moderating demand which will be transparent and will boost confidence.” 

He also informed the participants that “a more market driven approach will be best, some price discovery within the context of a managed float is certainly required. 

‘Some efforts at controlled price discovery that had been made in the past include the Foreign Exchange Market (FEM), interbank Foreign Exchange Market (IFEM), various iterations of the Dutch Auction System. (DAS), Wholesale Dutch Auction System (W-DAS), Retail Dutch Auction System (R-DAS).” 

In the statement, he explained, “While they may not have been perfect, it would appear as if the rules were clear and there was relative stability. When people know how they can access foreign exchange competitively, this will boost confidence and inward flows will increase.”