Osinbajo and Forex Policy: Facts of the Matter

President Buhari and VP Osinbajo at the retreat

The media in Nigeria were awash with reports that Vice President Yemi Osibajo was advocating lower exchange rate for the Naira. As a result, the media office of the VP has reacted to such statements and reports  “mischaracterising as a call for devaluation, the view of Vice President Yemi Osinbajo, SAN, that the Naira exchange rate was being kept artificially low.”
According to a statement signed by Laolu Akande, Senior Special Assistant to the President on Media and Publicity, Office of the Vice President, Professor Osinbajo “is not calling for the devaluation of the Naira. He has, at all times, argued against a willy-nilly devaluation of the Naira.”
For context, the Vice President’s point, as Laolu put it, was that currently the Naira exchange rate benefits only those who are able to obtain the dollar at N410, some of who simply turn round and sell to the parallel market at N570. “It is stopping this huge arbitrage of over N160 per dollar that the Vice President was talking about. Such a massive difference discourages doing proper business, when selling the dollar can bring in about 40% profit!”
The statement has it further: “This was why the Vice President called for measures that would increase the supply of foreign exchange in the market, rather than simply managing demand, which opens up irresistible opportunities for arbitrage and corruption.
It is a well-known fact that foreign investors and exporters have been complaining that they could not bring foreign exchange in at N410, and then have to purchase foreign exchange in the parallel market at N570 to meet their various needs on account of unavailability of foreign exchange. Only a more market reflective exchange rate would ameliorate this. With an increase in the supply of dollars, the rates will drop and the value of the Naira will improve.

The real issue confronting the economy on this matter is how to improve the supply of foreign exchange, but this will not happen if we do not allow mechanisms like the Importers and Exporters window to work. If we allow this market mechanism to work as intended, we will find that the Naira will appreciate against the dollar as we restore confidence in the system.”