01/02/2024
February 1, 2024
FOREX CRISIS, A PRECIPITATION OF AN ECONOMIC DEPRESSION: AN OPEN LETTER TO THE CBN GOVERNOR.
Dear Governor Mr Olayemi Cardozo,
I hope this letter finds you in good health and high spirits. I am writing to express my deep empathy for the challenges you are facing in your relentless fight against the cabals trying to hold our economy hostage. The current forex crisis has greatly contributed to the devaluation of the Naira and with inflation that develops at a rapid pace which is dangerous for the economy as it mostly affects the middle and low-income classes of population. It is also to note that the inflation we are witnessing can precipitate an economic depression if not managed properly as the well-being of every Nigerian in badly affected.
I understand the immense pressure you must be under as you navigate through these challenging times. It is evident that FX speculators and acts of sabotage within the system have been major contributors to the current crisis. It is disheartening to witness the repercussions of these challenges on both individuals and businesses alike. However, I believe that with strategic measures in place, we can overcome this crisis and build a stronger, more resilient economy.
To effectively deal with FX speculators and sabotage within the system, I would like to suggest a few steps that can be considered:
1. Strengthening Regulatory Framework: It is crucial to ensure that our regulatory framework is robust enough to identify and punish those engaging in speculative activities or sabotaging the forex market. Stricter laws, enhanced surveillance, and collaboration with other relevant agencies can help in this regard. I would like to suggest implementing stricter regulations and surveillance measures to identify and deter FX speculators. This could involve conducting thorough investigations to uncover any suspicious activities and taking legal action against those found guilty. By sending a strong message that such actions will not be tolerated, we can discourage speculative behaviors and help maintain a stable forex market. BDC should be proscribed and their license revoked. Policies should be made where it is illegal for individuals to hold any FX outside of the regulated banking sector. Holding FX outside the regulated banking sector should be made illegal, financial institution with excess FX must deposit same with CBN, the purchase of FX must be electronically documented for proper tracking. Any individual caught hoarding FX or storing FX outside of the regulated financial sector should forfeit it to government. It is also very important that all individuals at the point of entry into Nigeria must declare whatever FX they have and deposit with CBN. CBN will need to issue new license to Deposit Money Bank to trade FX. The capitalization for such banks should be raised to nothing less that N500 billion.
2. Market Transparency: Increasing transparency in the forex market will help minimize speculation. By sharing regular reports and data on exchange rates, liquidity, and currency flows, it becomes easier to identify abnormal activities and take necessary actions. It is crucial to address the issue of sabotage within the system. This may entail conducting internal audits and reviews to identify any weaknesses or loopholes that allow for sabotage. By reinforcing security measures, enhancing transparency, and holding individuals accountable for their actions, we can minimize opportunities for sabotage and ensure a more efficient and trustworthy system.
3. Promote Foreign Direct Investment (FDI): Encouraging foreign direct investment can not only boost our economy but also provide stability to the FX market. Creating a favorable business environment, offering incentives to investors, and ensuring ease of doing business will attract more investments and mitigate FX liquidity issues.
4. Diversification of Economy: Over-dependence on a single sector, such as oil, has been a major contributor to our forex woes. Therefore, it is imperative to focus on diversifying our economy by promoting non-oil sectors such as agriculture, manufacturing, and technology. This will not only reduce our reliance on FX but also create employment opportunities.
5. Collaboration with International Partners: Strengthening collaborations with international partners, such as the International Monetary Fund (IMF) and World Bank, can help in securing financial support, technical expertise, and best practices to effectively manage forex liquidity. Managing FX liquidity effectively is essential for stabilizing the economy. The Central Bank of Nigeria plays a crucial role in this regard. It is important to strike a balance between maintaining adequate reserves while ensuring sufficient liquidity in the market. This could be achieved through close monitoring of forex demand and supply dynamics, implementing appropriate monetary policies, and establishing strategic partnerships with international financial institutions.
Governor Cardozo, I am confident that with your leadership and expertise, we can overcome the challenges posed by the cabals and restore stability to our economy. I applaud your dedication and the measures you have already taken to combat these issues. Please know that you have the support and well wishes of the Nigerian people as you navigate through these difficult times.
Thank you for your unwavering commitment to our nation's economic well-being. I believe that together, we can overcome these challenges and build a stronger, more resilient economy for all Nigerians.
Yours sincerely,
Olayinka Falola (O’FALZ)
08130101312
[email protected]
Lagos, Nigeria.
