Feb 19 (Lagos) - As the scenarios of economic doom spread everywhere since the Naira has hit 400 against 1 US Dollar it is important for people to remain calm and not panic.
There are still some things that the CBN can do to redeem the value of the Naira against the Dollar.
1) Call an emergency meeting of the Monetary Policy Committee.
2) Increase Benchmark lending rate to 18-20% temporarily - This is the sure method of raising value of a currency. CBN shocked economists when it cut interest rates in November 2015 when the Naira needed help. The result in now in front of us. So it is important that the CBN not only reverses its policy but also increase the interest rates sharply to instill confidence in the Naira. Also this will enable to banks to make more money and they will relent on the ongoing speculations on the Naira. Remember the banks are already hurting since the TSA was adopted and the argument that lower interest rates will make banks lend more is flawed. Actually it is the higher interest rates that will make the bank to lend more.
3) Start selling USD to importers of 41 items. This will go a long way in bringing the Naira back to acceptable levels if the CBN sells forex directly to importers of the 41 items and makes sure the money is actually used to import those items.
The above three measures if adopted quickly can help salvage Naira value against the USD. And if the oil prices bounce back then we can even expect the Naira to return to 200 levels but the CBN needs to act now.
So the Naira is still redeemable only the right steps need to be taken quickly. The CBN leadership needs to show that it cares about economy. There are already allegations of massive corruption at CBN during 2014-15 and the apex banks needs to win the trust of people once again and then hope to win trust of foreign investors with the right policies for the current times.
reporting for easykobo.com on Friday, Feb 19 2016 from Lagos, Nigeria