Nigerians were clearly bewildered by the recent wild swings in the Naira Exchange rate. Regrettably, however, despite Godwin Emefiele's earlier assurances to the contrary, the Naira was officially devalued from N155=$1 to N165 and later to N197=$1 within his first year as Central Bank Governor.

Expectedly, the dollar rate quickly skipped beyond N220=$1 in the parallel market, while speculative dollar accumulation by hoarders and the subsequent denial of access to official forex to imports of 41 sundry items, later catapulted the parallel market Naira exchange rate beyond N240=$1. Notwithstanding, the CBN has again assured Nigerians, that the current Naira rate would be stable, as it is inappropriate for the tail (i.e. the small parallel market) to wag the dog.

 Nevertheless, the CBN may have been in denial of the inflationary potential on the economy of the ultimately higher market prices for rice and the 40 other items recently banned from official dollar purchase. Expectedly, the inevitable reality of such inflationary push, will compromise the CBN's capacity to achieve best practice rates of inflation and monetary policy rates below 2 percent respectively.

Furthermore, although parallel market Naira exchange rates improved immediately after the rejection of forex deposits from bank customers, in August 2015, such improvement will probably be short-lived as this development will certainly constrict the primary source of dollar supply from CBN's real time forex allocation to over 1,000 licensed Bureau de change (BDC) nationwide. It is certainly not best practice for Central Banks anywhere to, officially, directly fund BDCs, but CBN's apparent favorable disposition is clearly the result of the IMF's misguided prescription which made such liberal dispersal of official dollars to BDCs as one of the conditionalities for debt exit in 2005-6. 

Remarkably, monthly supplies to BDCs often exceeded $1b when Nigeria's dollar reserves approached the premium level of about $60bn; nevertheless, despite the apparent present scarcity, each BDC is still entitled to $30,000 allocation weekly, while Nigerians with Naira denominated debit cards can, also, still obtain $300 per day, up to a limit of $50,000 annually, directly from ATM terminals abroad at the official rate of N197=$1. 

It is disturbing that before the recent dollar crunch, CBN policy permitted every Nigerian tourist to cash up to $150,000 annually with Naira debit cards abroad! CBN's sustenance of such liberal forex allocations is clearly inexplicable, especially, when infact, probably less than 1 percent of Nigerians earn $50,000/annum, while dollar allocations to BDCs ultimately also fund imports of contraband and forex round tripping with a collateral threat to the survival of local industries and an enabling economic environment. 

Nonetheless, we are now back once more to the forgone era of the abuse associated with multiple exchange rates, despite the attendant economic distortions of this practice; for example, while faith pilgrims enjoy forex rates at N160=$1, importers of 41 recently delisted items would endure N225-250/$, while fuel, which is already subsidized and all other imports are favored with the presently subsidized forex allocation of N197/$.

Clearly, the wide disparities between the different Naira exchange rates and the huge opportunity for gain will undoubtedly instigate sharp practices in the forex market. Fortunately, the Senate has invited the CBN Governor to explain the reasons behind Naira devaluation and the wild swings in the parallel market. Expectedly, Emefiele will identify increasing speculation and the drop in crude oil price/revenue as the primary causes of the Naira's predicament.
It would be unfortunate if the Senate is sufficiently gullible to accept drop in crude price/revenue as a plausible cause of Naira depreciation, without asking the CBN Governor to explain why the Naira exchange rate remained static and unexpectedly even depreciated marginally when crude prices conversely exceeded $140/barrel, and forex reserves exceeded $60bn after debt exit in 2006! 

The reason for the price contradictions in the forex market have, lately, also agitated the minds of individuals as well as critical interest groups. For example, one, Matthew Somoye suggested in a Punch Newspaper advertorial of 16/7/2015, that the solution to a stable, stronger Naira and the elimination of multiple exchange rates would be found in the supply side of the foreign exchange equation; Somoye therefore recommended as follows:
"Every month, both the federal and state governments receive monthly allocations from crude oil dollar denominated revenue and CBN converts the Naira and gives out to States. This huge Naira volume chases few dollars which further fuels an already bad situation. CBN should change the order by paying the states and federal agencies in dollars" ....... "and for the commercial banks to buy the dollars from the state governments and sell to importers. The implication of this is that the so called FX that is scarce will not be that scarce, as genuine importers under eligible transactions can relatively find dollars from the interbank and the interbank will become rich again".

Similarly, the Ikeja Branch of the Manufacturers' Association of Nigeria concluded as follows in a Punch Newspaper advertorial titled "Manufacturers Association of Nigeria's position paper on the management of foreign exchange in Nigeria to enhance the performance of the manufacturing sector"( Punch 29/7/2015 edition, pg 54).

"We, as manufacturers will be very satisfied if inflation falls to less than 2 percent while monetary policy rate is anchored on a rate between 1-3 percent so that cost of funds to the real sector will fall below 8 percent across the board! We are confident that the adoption of dollar certificates for the allocation of distributable dollar revenue will quickly bring about the desired industrially supportive environment and also reduce the pool of excess Naira liquidity that drives corruption in the public service."

Finally, in its editorial of 6/8/2015, titled "CBN and the economy", the  Guardian  Newspaper examined the origin and trajectory of exchange rate management and concluded as follows: 
"For Nigeria to begin to close the gap by facilitating extensive investments that create jobs, Buhari should urgently stop both the politically dictated wrongful withholding by CBN of Federation Account dollar allocations and their simultaneous substitution with freshly printed naira amounts by not only directing the country’s public sector and autonomous forex to be transacted appropriately but also allowing the apex bank the leeway to professionally carry out its statutory mandate".

Instructively, the CBN is clearly familiar with the recommendation for the allocations of dollar denominated revenue with dollar certificates and indeed the Vision 2020 blueprint's 'monetary policy thrust' statement also recognized that the adoption of this payment reform would strengthen the Naira exchange rate and significantly reduce the rates of inflation and cost of funds. In retrospect, after over 5years of brazen denial, commonsense ultimately prevailed and the CBN adopted this enabling payments system in its "Strategic Agenda for the Naira" in August 2007. Regrettably, the initiative was Dead on arrival as the incumbent Attorney General, one Andoaka, summarily truncated the change for being unconstitutional. Sadly, the CBN authorities have become too timid since then to even contemplate the urgency to once more embrace the adoption of this clearly enabling reform strategy that would enable the Apex bank to achieve its raison-d'être of market price stability.

The question we need to ask however is whether it is constitutionally valid for an Agency of government to knowingly sustain a practice that is counterproductive and clearly challenges any prospect of increasing the rate of employment  and inclusive economic growth. Such practice would certainly be in contradiction of sections 14-2(b) and 16-1&2 of the constitution which clearly define the primary role of government to be the provision of security and the improved social and economic welfare of our people.