Buhari Rules out Further Naira Devaluation

Muhammadu Buhari

President Muhammadu Buhari has said he is opposed to a weakening of the naira and endorsed the Central Bank of Nigeria’s (CBN) policy of restricting foreign exchange trading.

“I don’t think it is healthy for us to get the naira devalued,” Buhari said in an interview in Paris with France 24 broadcast wednesday. The central bank is proving ample foreign exchange to “essential services, industries,” he said.

After a halving of oil prices in the past year, CBN Governor Godwin Emefiele reacted to the naira’s drop to a record low in February by extending trading curbs and introducing bans on purchases of dollars by certain importers.

While the currency has since stabilised, foreign investors, local businesses and even some of Emefiele’s fellow Monetary Policy Committee (MPC) members have complained that that the naira is overvalued.

Currency controls have left Nigerian companies unable to source the dollars they need to pay foreign suppliers, Bloomberg quoted Atedo Peterside, Chairman of Stanbic IBTC Holdings Plc, the local unit of Africa’s largest bank, Standard Bank Group Ltd.

“People underestimate the problems that exchange rate systems can pose to businesses,” Peterside said in an interview wednesday in Lagos, the commercial capital. “Instead of doing business, they’re devoting 40 per cent of their time to scouting around for dollars, pulling crumbs together.”

Nigeria’s economic growth slowed to 2.35 percent on an annualised basis in the second quarter, down from 6.54 per cent a year earlier. The central bank’s policies are partly to blame and have hurt manufacturers, according to Renaissance Capital.

Doyin Salami, an MPC member who criticised the regulator’s decision in June to stop importers of about 40 items from accessing foreign exchange markets, said Nigeria would soon have to change its stance on the naira.

It cannot carry on trying to maintain a fixed exchange rate, independent monetary policy and free movement of capital, he said at a conference wednesday.

“You’re allowed to choose two out of the three,” he said. “The key question is which two will Nigeria choose. That will have to be answered in the coming months. I would rather Nigeria maintain an independent monetary policy and have a market-determined exchange rate.”

Last week, JPMorgan Chase & Co. excluded Nigeria from its local-currency emerging-market bond indexes, tracked by more than $200 billion of funds, after the central bank’s restrictions prompted investor concerns about a shortage of liquidity.
The naira remained little changed at 199.05 per dollar on the interbank market at 3:05 p.m. in Lagos.