CENTRAL BANKING AND MACROECONOMIC UNDERDEVELOPMENT.PART 14G

14g.CENTRAL BANKING. Price Stability and Exchange Rate Sustainability. Ever since 2002,when the central bank initiated guidelines for long term lending an also convergence of various markets through interbank foreign exchange market(IFEM) policy.Strategic inputs were made by the Bankers committee especially its subcommittee on fiscal and monetary policy and the opinion was that to CBN there was no parallel market.Unfortunately over the years speaking with double mouth it has encouraged them.Imagine,yet the apex bank was auctioning the dollars,funding the Bureau de charge and encouraging arbitraging activities that fueled capital flight and currency erosion.Blatant liar!So,one is not surprised it has failed in almost all operating measures introduced for two decades including banks recapitalization. Exchange rate being the relative price of different national currencies is determined by market forces driving stocks of national monies on the foreign exchange market worldwide.In general,it reflects the underlying health of the economy and also economic fundamentals of forex market forces,inflation rate, unemployment rate,market psychology and balance of payment position.This does not exclude sociopolitical factors and other factors earlier mentioned.This includes periodical worsening liquidity overhang spurred by excessive monetization of petrodollars earnings,uncoordinated bouts of fiscal expansion. Consequently,broad and narrow measures of the money supply (M1) and (M2),