Osinbajo at Ministerial retreat, decries dearth of synergy in fiscal, monetary policies

Lack of synergy between fiscal and monetary policies is the major cause of unnecessary drawbacks in the nation’s economic performance and planning, Vice-President Yemi Osinbajo (SAN) has said.

According to him, controlling the demand and supply chain of the foreign exchange has also impacted negatively on the economy.

“There are three areas of concern. The first is the synergy between fiscal and monetary policy. The failure of that synergy has led to unnecessary drawbacks in our economic performance and planning.

“What imports are eligible for foreign exchange must agree with the fiscal ambitions for manufacturing and industry,” Osinbajo said on Monday in his presentation at the opening of the 3rd Ministerial Performance Review Retreat in Abuja chaired by President Muhammadu Buhari.

“The second is that our exchange rate management continues to be an issue. The exchange rate of the naira to convertible currencies continues to face significant downward pressure because demand substantially outstrips supply. That is just the reality.

“On one hand we have tried demand management and rationing, which has not really worked because fixing the price while the parallel market reveals a massive arbitrage merely creates the opportunity for massive rents.”

Prof. Osinbajo pointed out that the situation would also compound the backlog of remittances for foreign businesses who want to repatriate their earnings.

He said:”The discussion that we must now have and going forward is how best to manage the situation by finding a mechanism for increasing supply and moderating demand which will be transparent and will boost confidence.

“A more market driven approach will be best, some price discovery within the context of a managed float is certainly required.

“Some efforts at controlled price discovery that had been made in the past include the Foreign Exchange Market (FEM), interbank Foreign Exchange Market (IFEM), various iterations of the  Dutch Auction System. (DAS), Wholesale Dutch Auction System (W-DAS), Retail Dutch Auction System (R-DAS).”

Stating that while they may not have been perfect, Osinbajo said it would appear as if the rules were clear and there was relative stability.

“When  people know how they can access foreign exchange competitively, this will boost confidence and inward flows will increase,” he said.