The naira should not be devalued further, President Muhammadu Buhari said on Wednesday, despite the Central Bank of Nigeria’s growing struggles to keep the naira at current levels.
The nation’s revenue has been hit hard by the fall of global crude prices, and the CBN has imposed increasingly strict foreign exchange rules to save the external reserves and avoid what would be the third devaluation in one year.
The central bank had devalued the naira in November last year and February this year.
Despite the CBN’s uphill struggle to keep the naira from falling further, Buhari believes the naira must not be devalued.
“I don’t think it is healthy for us to have the naira devalued further,” Buhari said in an interview with France 24.
“That’s why we are getting the central bank to make modifications in terms of making foreign exchange available to essential services, industries, spare parts, essential raw materials and so on – but things like toothpicks and rice, Nigeria can produce enough of those,” he said.
The naira had fallen to as low as 242 per dollar on the parallel market in July, versus the official rate of 197. It has lost around 15 per cent against the dollar over the past year with the official devaluation in November and a de facto one in February.
In June, the CBN restricted access to foreign exchange for the import of 41 items ranging from rice and toothpicks to steel products and glass.
The stringent restrictions have not gone down well with investors, who have called for a relaxation.
Last week JP Morgan said it would remove Africa’s biggest economy from its influential emerging markets bond index by the end of October, citing a lack of liquidity and the central bank’s currency restrictions.
But Buhari’s position conflict with those of some local and foreign economists and analysts, who believe the naira must be devalued.
Reacting to JPMorgan’s decision and defending its policies, CBN’s Debt Management Office and the Ministry of Finance, in a joint statement, said
given the high propensity for speculation, round tripping, and rent-seeking in the market, it became imperative that participants are not allowed to simply trade currencies, but are only in the market to fulfill genuine customer demands to pay for eligible imports and other transactions.
“In the light of this, we introduced an order-based, two-way FX market, which has resulted in the stability of the exchange rate in the interbank market over the past seven months and largely eliminated speculators from the market.
“Despite these positive outcomes, JPMorgan would prefer that we remove this rule, even though it is obvious that doing so would lead to an indeterminate depreciation of the naira. With dwindling oil prices, we believe that an order-based two-way market best serves Nigeria’s interest at the moment.
“While we would continue to ensure that there is liquidity and transparency in the market, we would like to note that the market for FGN Bonds remains strong and active due, primarily, to the strength and diversity of the domestic investor base.
“For the avoidance of doubt, the Federal Government sees Nigeria and the interest of Nigerians as paramount. It will, therefore, only continue to take economic decisions that will impact positively in the lives of all Nigerians.”
President Buhari also said in the interview that markets were not being harmed by the delay in ministerial appointments, which he says will happen by the end of the month.
He said: “Work is being done by technocrats; they are there and they provide the continuity.”
The naira remained little changed at 199.05 per dollar on the inter-bank market at in Lagos.