Get real time updates directly on you device, subscribe now.
A year after taking over as President of Nigeria, Muhammadu Buhari is facing an economy that is struggling.
Hit by the collapse in oil prices and rebel activity in the Niger River delta, the country will soon enter recession.
Against this, the central bank promised last week to allow ‘increased flexibility’ in the naira’s currency peg — a peg that was a central pillar of Buhari’s economic policy.
Over the weekend the president — who once likened letting the currency weaken to “murder” — caused confusion when he emphasized the need for stability in the naira. He backed down a little from this position yesterday, but remains opposed to devaluation, according to his spokesman.
The Head of Research at Sterling Capital Markets Limited, Sewa Wusu, has, however, criticised Buhari’s positions as contradictory. “How do you say you don’t believe in devaluation if that is what will create a fair price or bring about a market-determined rate?” Wusu told Bloomberg by phone from Lagos. “The government should come out clearly and say what it wants,” he said.
Wusu was responding to comment credited to the President’s Senior Special Assistant on Media and Publicity, Garba Shehu, that “The president is opposed to devaluing the naira, he has said so repeatedly…but he has given them (CBN) the leeway to introduce what he has called ‘flexibility in managing the currency’s value.”
Related Posts
The President had said in his Democracy Day speech on Sunday that he supported a stable currency, though he would keep “a close look at how recent measures affect the naira and the economy.”
Meanwhile, the Naira at interbank market has crashed to N285 to the dollar ahead of the release of modalities for the implementation of the adopted flexible exchange rate policy as announced by the Central Bank of Nigeria (CBN).
This was sequel to increased perception that CBN has withdrawn from the weekly foreign exchange (forex) intervention, which forms part of the newly adopted policy, paving the way for banks and Bureau De Change (BDC) operators to source forex autonomously and sell according to market dynamics, Guardian reports.
The interbank rate had run nearly at par with the official at N199 per dollar and N197 per dollar respectively before the pronouncements on the new foreign exchange measure.
The new rate represents about 43.2 per cent increase from N199 to the dollar it previously traded, which according to analysts suggests that the market is gradually adjusting itself to the new direction, although the details are yet to be unfolded.
The CBN Governor, Godwin Emefiele, had last week after the Monetary Policy Committee meeting said that while adopting the new policy, the apex bank would only open a small window for critical transactions, which relate to the import of plants and equipment to produce goods for which their raw materials are almost 100 per cent available locally.
