Investors hoping that Nigeria’s central bank Governor Godwin Emefiele will succumb to pressure to devalue the naira weren’t aware of one crucial factor: he has the backing of President Muhammadu Buhari.
In his first public comments on the currency since taking office in May, Buhari, 72, said on Wednesday he opposes a weakening of the currency. His stance endorses Emefiele’s policy of restricting foreign-exchange trading to stabilize the naira despite a plunge inoil revenue in Africa’s biggest crude producer.
It also raises questions about the central bank’s independence and puts the two men at odds with foreign investors, local businesses and some members of the Monetary Policy Committee who say the naira is overvalued, deterring capital inflows and hindering economic growth.
“There appears to be some unwritten agreement between the presidency and the central bank that the naira will not be devalued, in spite of the deteriorating fundamentals,” Alan Cameron, an economist at Exotix Partners LLP in London, said by phone. “Neither the presidency nor the central bank governor appear willing to acknowledge the trade-off between a fixed naira and an economy that’s functional.”