COMMITTING ECONOMICIDE.

The Central Bank of Nigeria, CBN, yesterday, announced a flexible exchange rate regime assumedly and supposedly aimed at making foreign currencies more accessible. With this action, the CBN has eventually nullified the official exchange rate regime of N197/dollar.

CBN announced a free floating forex regime where the exchange rate will be determined by supply and demand. “Official rate” as we know it has effectively been abolished.

On the surface, the move may seem to be a welcome “hands off” by government but in actuality, the move has very serious and dire consequences as it may usher in an era of financial gangsterism, epic in proportion.

Foreign exchange earnings are dwindling by the day primarily due to the militant attacks on oil facilities and also because of the failure of government to get to work on non oil exports, choosing rather to channel its energy and focus on battling supposedly corrupt members of the main opposition party.

There isn’t enough forex to meet the demand, in short. This means of course that the rates are bound to spike, fantastically. Importers of refined products for instance will make a run at whatever dollars are available, unscrupulous bankers will source and hoard even spooked small businesses and individuals will try and get what they can. Chaos looms.

The next couple of weeks will be very interesting.