Dr. Tunde Lemo, a former Deputy Governor of the Central Bank of Nigeria, has cautioned against allowing the naira to free float in the foreign exchange market. He argued that given the country’s current economic conditions, including low reserve levels and trade deficits, it would not be advisable to implement such a policy. Instead, he emphasized the need for the Central Bank to address backlog issues in the foreign exchange market and restore confidence to stabilize the naira.
Key Points:
- Dr. Tunde Lemo, former Deputy Governor of the Central Bank of Nigeria, advises against the free floating of the naira in the foreign exchange market.
- Lemo highlights concerns about low reserve levels and trade deficits as factors that make free floating ill-advised at this time.
- He points out that only a limited number of currencies, like the dollar, euro, and Japanese yen, are on free float globally, while others are managed.
- Lemo emphasizes the importance of addressing backlog issues in the foreign exchange market to restore confidence and stabilize the naira.
Analysis: Dr. Lemo’s advice reflects a cautious approach to economic policy, taking into account Nigeria’s specific circumstances. His concerns about low reserves and trade deficits align with the need for a measured response to ensure economic stability. Addressing backlog issues in the foreign exchange market is seen as a crucial step in rebuilding confidence. This perspective underscores the complexities of managing currency policies in the face of economic challenges. As with any economic decision, it’s essential to weigh the potential benefits against the risks and ensure that policies align with the broader economic goals of the country.
