Devaluation: CBN, Naira and matters arising


By Sani Adamu

Entrenching a realistic and sustainable micro-economic policy in Nigeria has been a huge challenge for years.

Although successive administrations have considered various micro-economic policies to strengthen the economy, reduce inflation and stabilise the Naira, economists say much still needed to be done to get it right.

A financial analyst, Gideon James, said many of the measures by previous administrations did not yield the desired results, as the Naira remained unstable.

Although the Naira recently strengthened against the dollar after weeks of free fall at the parallel market, Mr. James said the currency was still exchanging at the black market at more than N280 to a dollar.

Apparently determined to rescue the Naira from further depreciation, the Central Bank of Nigeria (CBN) governor, Goodwin Emefiele, said the Bank would evolve additional measures to boost the nation’s economy and stabilise the Naira.

During an interactive session with editors recently in Abuja, Mr. Emefiele, however, declined to give details of the modalities for the implementation of the new measures.

The CBN boss explained that the Nigerian economy was not as bad as being portrayed, compared with other economies in Africa.

He advised importers to restrict their imports to raw materials and equipment, rather than finished products and food items, to reduce the pressure on the nation’s scarce foreign exchange.

“CBN will soon start a nationwide campaign to sensitise Nigerians on items excluded from importation as part of efforts to save more foreign exchange and stabilise the nation’s currency,” he said.

“If we are able to reduce importation, the demand for the dollar will fall automatically. The country should go back to the farm to produce what was needed.

“Public servants should also engage in farming, because that is the only business public servants are allowed to engage in,’’ Mr. Emefiele said.

According to him, the CBN has ensured reasonable stability in the value of the Naira, by keeping official exchange rate to the dollar at between N196 and N197 to the dollar.

Mr. Emefiele advised Nigerians to always request foreign exchange from their banks at the official rate.

The CBN boss, however, insisted the 22 per cent depreciation of the Naira was reasonable compared with other emerging economies adversely affected by global economic recession.

“for example, Zambia has depreciated its currency by about 48 per cent; same Brazil from October last year till now, while Angola has equally done so by 25 per cent.

He said Nigeria’s situation was not as bad as people think, pointing out that with devaluation, there must be a structural adjustment.

The CBN, he explained, has never followed up with structural adjustment, pointing out that the approach adopted at the moment was to have a 22-per cent adjustment in the currency.

“Let us stop importing tooth pick, tomato from South Africa. That is what we are saying. Nigeria can do without these items. The truth is that the reserves are no longer there,’’ he said.

Mr. Emefiele said the CBN had created the enabling environment to encourage growth of small scale businesses through grant of soft loans to operators.

He said only N60 billion of the more than N200 billion soft loans meant for SMEs had been accessed so far.

Nigerians, he advised, must be patient with the Buhari administration in its efforts to ease the sufferings of Nigerians, noting that savings from the Treasury Single Account, TSA, was so far more than N2 trillion.

Regardless, the National Leader of the All Progressives Party, Bola Tinubu, urged the Federal Government to evolve policies that would stop the Naira-to-dollar link economic operation, to facilitate more economic growth and fiscal stability in the country.

Mr. Tinubu spoke at a conference organised by the Centre for Democratic Development, Research and Training in memory of the late Bala Usman in Kaduna recently.

“Regarding fiscal policy, I advocate the close dollar linkage be explicitly broken. Nigeria operates a Naira, not a dollar-based economy.

“The Federal Government has the sole power and sovereign right to issue Naira without the approval of the American Federal Reserve, the Bank of England or of the host of global oil buyers.

“There is no legal or moral restriction strictly limiting the amount of Naira placed in the system to spawn employment, to match the amount of dollars collected via oil sales.

“For decades, Nigeria has danced in close confines with economic disaster. We have survived, but not thrived; improvised, but not planned.

“Unless we embrace the truth that shaped the Bala Usman’s prescriptions, Nigeria will remain a land of false mirrors, where we look at ourselves, but see something else; a land of past potentials, with a future gone astray.

“The past administrations claimed tremendous gross domestic growth, but all around we see more factories closing than opening.

“Too many projects left undone, many homes unlit, many roads unpaved, and many people with few jobs,’’ Mr. Tinubu said.

He said the country needed economic liberation to free the economy, noting that “before we can free our economy, we must free ourselves of the economic myths consigning us to our current predicament.

“The task before us is grave and daunting. With oil prices declining so steeply, the question is: how will the Federal Government shape fiscal policy so that we achieve optimal economic production and employment under the given circumstance’’.

However, Evans Osabouhien of the Department of Economics and Development Studies, Covenant University, Ota, Ogun state, predicted the Naira would regain its strength again because many Nigerians living abroad had been coming to Nigeria with foreign currencies.

Mr. Osabouhien said this would reduce the pressure on the foreign exchange market and strengthen the Naira.


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