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How to overcome unstable exchange rates – NISER

By on September 11, 2014

The Nigeria Institute of Social and Economic Research has called on the Federal Government to employ sound monetary and fiscal policies in order to tame the unstable exchange rates, which complicate debt servicing.

At the institute’s monthly seminar held in Ibadan on Tuesday, Mr. Amos Ogunwale of the Department of Surveillance and Forecasting, stated in a lecture entitled: ‘Macro-economic effect of external debt accumulation in Nigeria’, that it was imperative to keep the domestic inflation low so as to avoid spikes in the volume of the external debt.

He said, “While a high interest rate policy may contain inflation and help stabilise the exchange rate, interest rate should be lowered in order to stimulate consumer and business investment spending.

“To achieve an enduring strategy to comprehensively address the debt issue in Nigeria, there is the need for a sustained long-run growth of the economy and improved export performance.”

Ogunwale added that the Federal Government appeared to have embraced the view by paying off much of its debt in 2006 to free up funds for developmental purposes, noting that the growing appetite for external loans in recent times had raised concerns about the prospect of a return to a huge debt scenario in the future.

He said, “A contextual examination of the impact of external indebtedness on the macro-economy will shed light on the external debt question in Nigeria and illuminate the path of policy action in the years ahead.

“This entails the removal of structural bottlenecks in sectors such as power, road, ports, rail, communication technology and aviation as well as the implementation of supportive policies for local and foreign investments to flourish in sectors such as agriculture, manufacturing, housing, solid minerals, oil and gas.”

 

[Punch]