Kingsley Moghalu; a former Deputy Governor of the Central Bank of Nigeria, claims that if there is a significant influx of dollars into the Nigerian market through export value, the value of the naira will increase from N570/$1 to N400/$1 on the parallel market.

On Thursday, Moghalu revealed this in a PUNCH Live Interview.

“The reason we have the prices we have is that the official rate is perceived by the market not to be the real rate; that’s the fundamental reason why you have a huge gap of N410 at the official rate – Investors and Exporters’ Window – and then N570 in the black market. That is unbelievable,” he said.

“Normally, you will have a gap between the official rate and the parallel market but in our time, we made sure that that gap was not a lot – it wasn’t more than N10, N15, max N20.

“What is happening now shows that there is a very fundamental crisis in the Nigerian economy. And unfortunately, the economy does not respond to political commands, the economy does not respond to political statements, the economy does not respond to military orders; the market responds to its own dynamics – demand and supply.

“If you have a massive rush of dollars into the Nigerian market today, the price of the dollar would crash and the naira can come to N400 in the black market, you may be shocked.

“So, it is about going to fix what would bring in the quantity of dollars that would rebalance the equation.”

Moghalu, who served as a deputy governor at the CBN from 2009 to 2014, also discussed how the apex bank managed to keep the naira stable against the dollar for five years during his tenure, saying that the CBN still needs to work on building investor trust.

Sanusi Lamido Sanusi, served as Governor of the Central Bank of Nigeria from June 2009 to February 2014, together with his depot, Moghalu.

During the administrations of late President Umaru Yar’adua and then-President Goodluck Jonathan, both Sanusi and Moghalu worked at the apex bank.

At their time, the naira remained stable at roughly N150/$1. However, since the beginning of the current President, Major General Muhammadu Buhari (retd. ), and the CBN Governor, Godwin Emefiele’s administration, the naira has maintained an unusual downward trajectory.

The naira is now trading at roughly N570/$ on the parallel market, while it is trading at around N412/$ at the I&E FX Window, the CBN’s only official rate.

Some political groups, notably the Peoples Democratic Party, have called for the CBN Governor, Godwin Emefiele, to be fired or resign due to the naira’s downward trend. They accused Emefiele, who has been the governor of the Central Bank of Nigeria since June 2014, of the bank’s bad monetary policies.

Addressing the issue on Thursday, Moghalu blamed the naira’s downward trajectory on the operations of speculators and the apex bank’s lack of autonomy.

When asked how he and Sanusi were able to keep the naira stable against the dollar for so long, Moghalu said that the apex bank worked on investor trust at the time.

However, the former CBN deputy governor complained that the central bank has lost its autonomy to the political class and has little or no investor’s trust.

He said that the current administration has failed to respect the independence of the CBN, making it a choice for the governor whether to comply or to resist, and he/she bears the consequences for the country’s political leaders.

It previously reported that the CBN stopped selling forex to Bureau De Change operators in July and instead advised legal travelers to seek banks for low-cost forex, but banks have been flooded with fraudulent requests.

BDCs, according to Emefiele, have abandoned their original mission of providing forex to retail customers and have instead become wholesale and illicit traders.

When asked if the CBN’s decision to halt forex sales to BDCs was the reason for the naira’s recent downward trend, Moghalu stated the CBN should not have sold FX to BDCs in the first place.

“A Central Bank supplying foreign exchange to BDCs is very odd, Nigeria must be the only country or one of the very few countries that do that. It is only part of the wider problem.

“Statism is killing the Nigerian economy, the government interferes too much in the market and in that process, distorts the markets and the Nigerian citizen suffers,” he said, adding that selling foreign exchange to the BDC encourages hoarding, roundtripping, and exploitative tendencies among those who do not require foreign exchange but have access to it.

He also claimed that the presidential order instructing the CBN not to release money for food importation, including heavily consumed commodities such as milk, was a contributing factor to the country’s rising forex demand because the country does not produce enough milk despite high demand for the item among Nigerians.

Continuing, Moghalu stated that the CBN is draining the government’s foreign reserves by pouring more forex into the market, saying that economic diversification and exportation were the only ways out of the FX problem.