Nigerian presidential hopeful says fixed exchange rate regime must end; praises fintech unicorn Flutterwave
September 6, 2022 9:53 AM
Peter Obi, a presidential candidate in Nigeria, has argued that the exchange rate of the local currency against the US dollar should not be set in stone but instead left to "the forces of demand and supply." The candidate made an appeal to voters by referencing the success of the Nigerian fintech Flutterwave and promising to make it easier for other startups to achieve the same level of success should he be elected.
Shocking Attack on the Two-Tier System of Currency Exchange
Peter Obi, a presidential candidate in Nigeria, has said that the market should set the official exchange rate of the local currency, which is currently set at just under N450 to the dollar. Obi, one of three leading candidates vying to succeed departing President Muhammadu Buhari, has criticized the country's dual exchange rate system.
Labour Party candidate's comments come a little over a month after the naira hit an all-time low against the US dollar. A record low of N710 per dollar was reported by Bitcoin.com News at the end of July. The Central Bank of Nigeria (CBN), which last devalued the naira in May 2021, blamed speculators for the naira's rapid depreciation at the time.
When the CBN made their accusations, the Economic and Financial Crimes Commission (EFCC), Nigeria's anti-corruption body, swooped down on currency dealers and bureau de change operators in and around the Wuse Zone 4 area of Abuja. At first, it seemed like the naira's recovery had been sparked by the EFCC's raid on currency speculators. A month and a half later, however, the naira was trading at over N700 to the dollar again.
A Monetary Policy of Restraint Envisioned
Obi has proposed a solution that he claims can put an end to the naira's woes, which he outlined in a Twitter thread outlining his plans for the country should he win the presidency. He elaborated:
"The naira's exchange rate has not been set by market forces for quite some time. The current two-tiered system of foreign exchange is a statistical anomaly. It must stop. Let the market determine the exchange rate. In a nutshell, yes."
The Labour Party candidate has promised that if elected, his government will not use price and wage controls to combat inflation, and has also pledged to end the fixed exchange system. A "contractionary monetary policy" is what it has decided to "pursue" instead.
Also in this thread, Obi praised the success of the Nigerian fintech startup Flutterwave, which is now valued at over $1 billion. Obi has pledged that his government "will create an enabling environment for our startups to thrive," so that more businesses can follow in the footsteps of the many that have already found success. To accomplish this, a legal framework that safeguards "foreign investors and their indigenous partners" will be enforced.