A former Deputy Governor of Central Bank Of Nigeria (CBN), Dr Obadiah Mailafia, has called on the Federal Government to take measures that will make Naira convertible international trading currency.
Mailafia, who spoke in Abuja on Monday, recalled that about 40 years ago, Naira was accepted abroad for trading and other purposes.
“In the 70s, Nigerians were spending Naira in London. It was accepted.
“In fact, our Muslim brothers used to go to Mecca and Medina that time and they could spend and buy goods with Naira.
“The situation has changed that even in Benin Republic, they don’t accept Naira.
“We need to restore the purchasing power, the honour and dignity of the Naira as our proud currency and the symbol of National honour,’’ he said.
Mailafia, therefore, urged the government to begin the efforts that would shore up the value of the currency so that it could be acceptable internationally in the next decade.
He called for the strengthening of the Naira, adding that vigilance should be exercised not to allow fake currencies, including the Naira, to enter the country.
According to him, monetary authorities in the country need to be more vigilant because there is a law of finance that says bad money always chases away good money.
“It is like a computer virus, you put one virus, it can wipe off all good data you have and this is what happens with fake currency.
“Once it enters the system, it begins to infect the whole monetary and financial system.’’
In addition, Mailafia advised that the CBN should earn the trust of Nigerians by being transparent the way it operated foreign exchange market.
“The CBN should be transparent on its implementation of monetary policies and the way it supervises commercial banks.
“ This will catalyse commercial banks to do what they are expected to do to restore this economy,’’ he said.
He further said that restoring the Naira also meant to diversify the economy and diversify the country’s export base.
“When you do that and diversify the sources of revenue and income, it eases pressure on domestic currency so it will continue to be strong.
On foreign exchange policy, the former CBN boss said that some analysts had advised the government to change the new policy in order not to deplete the country’s external reserve.
“The CBN, in the policy, said that in order to ease the difficulties encountered by Nigerians in obtaining funds for foreign exchange transactions, it would henceforth be providing direct additional funding to banks.
“This is to meet the needs of Nigerians for personal and business travel, medical needs and school fees effectively.
“The CBN said such retail transactions will be settled at a rate not exceeding 20 percent above the interbank market rate.
“We cannot continue to do this forever without depleting the external reserves; if you deplete the external reserves, in fact, the Naira can fall to 1,000 to a dollar.
“We should have a deliberate policy of working toward unification and integration of multiple exchange rates into the law of one price so that there will be clear transparency in the system.
“It might involve going back to the Dutch option system that we had sometimes ago which did well, by the way,’’ he said.
Dutch option is a public offering auction structure in which the price of the offering is set after taking in all bids and determining the highest price at which the total offering can be sold.
In the type of auction, investors place a bid for the amount they are willing to buy in terms of quantity and price.