Nigerian presidential election candidate Peter Obi said the exchange rate of the local currency against the dollar must not be fixed and must be determined “by forces of supply and demand.” The candidate pointed to the success of Nigerian fintech company Flutterwave and said that if elected, the government will create an environment where other startups can thrive and succeed as well.
Two-Step Exchange Rate Regime Under Attack
Peter Obi, a candidate in Nigeria’s upcoming presidential election, said that the official exchange rate for the local currency (currently fixed at just under 450 to the dollar,) should be determined by market principles He said that market principles should determine the official exchange rate. Obi, one of the three main contenders to succeed outgoing President Muhammadu Buhari, also attacked the two-tier exchange rate regime currently in use.
The Labor Party candidate’s remarks came just one month after the naira plunged to its worst-ever exchange rate against the U.S. dollar, which, as Bitcoin.com News reported in late July, had reached a record low of 710 to the dollar. The Central Bank of Nigeria (CBN), which last devalued the naira in May 2021, blamed speculators for the naira’s sharp decline at the time.
Shortly after the CBN’s complaint, the Economic and Financial Crimes Commission (EFCC), Nigeria’s anti-corruption agency, raided currency dealers and money changers in and around Wuse Zone 4, Abuja The EFCC’s crackdown on currency speculators initially seemed to have the naira’s recovery seemed to spark a firestorm. However, more than a month later, the naira’s exchange rate is back above 700 to the dollar.
envisioning a “contractionary monetary policy”
In aTwitterthreadoutlining his plans for the country if elected president, Obi proposed a solution he said could end the naira’s woes. He explained that.
The truth is that for a long time, market forces have not determined the exchange rate of the naira; the two-tier foreign exchange system is a product of chance. It must end. Let the exchange rate be determined by the forces of supply and demand. It is very simple.
In addition to abandoning the fixed exchange rate system, the Labor candidate said that if his government were elected, it would not fight inflation using price and wage controls. Instead, he said, he would “pursue a contractionary monetary policy.”
Meanwhile, in the same thread, Obi touted Nigerian fintech startup Flutterwave, which has since grown into a billion-dollar company. In order for more startups to succeed in the same way, Obi said he would “create an environment for startups to thrive.” This would be done by enforcing a legal framework that protects both “foreign investors and their indigenous partners.”
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Image credits: Shutterstock, Pixabay, Wiki Commons