Tinubu’s forex blunder sends inflation soaring
Sopuruchi Onwuka
The Naira fell to a new low on Friday as new gaps begin to emerge between official rates and the parallel market despite despite the executive fiat by the new administration of Alhaji Bola Tinubu to enforce a unified exchange system.
A Bloommberg report stated that Naira exchanged for the dollar at N923, the worst value in the nation’s currency history. And inflation continues to pauperize low income earners as prices of goods hit through the roof.
The new president who suspended the Central Bank Governor before ordering his prosecution had subsequently dismantled all official exchange windows, pulliing all support instruments and pushing the Naira into a free fall.
The former CBN Governor had installed the dual exchange rates to protect the Naira from total collapse and control inflation by making foreign exchange available for critical imports; especially goods, machinery and equipment required for production and essential services.
In dismantling the multiple exhcnage rates however, President Tinubu explained that the system made limited foreign exchange available to racketeers who, he said, used their privileged access to exploit desperate seekers.
But the forex market rate unification strategy of the new government has produced unintended outcomes as banks are overwhelmed with uncontrolled demand, and parallel market dealers still rule the market with large margins.
At the weekend, official rate saw the Naira sink further to N782.38 to a dollar on Thursday at the FMDQ’s OTC Securities Exchange. And by Friday it sank to all time low of N923 per dollar.
The situation, The Oracle Today reports, has actively restored the exchange rate differential which the new government is making vain efforts to achieve.
It does appear that President Tinubu’s attempt to find a middle range between the official and parallel rates and stimulate large volume remittances into the country failed right from the start, as all the aims have never been realized.
With withering Naira, cost of living is increasingly unbearable. Inflation in the economy keeps galloping, sparking a spate of public outcry and prompting workers to demand for salary increase.
In his desperate effort to avert a nationwide strike, the new president has raised pay for civil servants and political office holders, stepping right into the same blunder committed by his predecessor: pumping money into the economy instead of addressing inflation through enhanced productivity.
A UK based Nigerian research scholar, Dr Emmanuel Okoroafor, had warned at the inception of the new government that the only way to sustainable economic recovery is to control inflation and restore value on the Naira.
He made it clear that raising wages without enhancing domestic production of goods to displace imports would only aggravate inflation.
He urged the Tinubu government to understudy the UK’s method of keeping the pound sterling strong through inflation control.
