Experts Applaud Buhari’s Anti-Naira Devaluation Stance | Independent Newspapers Limited
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Experts Applaud Buhari’s Anti-Naira Devaluation Stance

Posted: Sep 17, 2015 at 12:30 am   /   by   /   comments (1)

•  President Seeks Review Of CBN’s List Of Banned Items 

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By Andy Nssien, Sylvester Enoghase, Bamidele Ogunwusi and Ejikeme Omenazu (Lagos)

Experts, on Wednesday, applauded the concurrence of President Muhammadu Buhari with the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, not to further devalue the Naira, despite proddings.

While the renowned economist and newspaper columnist, Henry Boyo, expressed happiness at the President’s statement, which he described as good news, Tola Odukoya, chief executive of Lagos-based Dunn Loren Merrifield Assets Management Company, says the statement shows Buhari’s readiness to start work.

Emefiele had while being screened, prior to assumption of office, told Senators that the CBN under his watch would not devalue the Naira, because Nigeria being an import-dependent economy, it would raise the cost of imports.

Another reason he gave was that it would hurt helpless consumers who would see the value of their income eroded.

In an interview with France 24, as part of his three-day official visit to Paris for talks with President François Hollande, on Wednesday, President Buhari maintained that further devaluation of the Naira would be avoided because the trend is not healthy for the economy.

Buhari said: “The Naira has been devalued, it used to be around N160/$, and now, it is hovering around N200/$ and above, and I don’t think it is healthy for us to have the Naira devalued further.”

He disclosed that the Federal Government had directed the CBN to instead make modifications that would help to boost the economy.

As he put it: “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 tooth-picks and rice… Nigeria can produce enough of those.

“We don’t need to give our hard currency on that, but those who insist of having tooth-pick from Europe or from China, instead of using Nigerian tooth-pick, they can go and source their foreign exchange.”

The Naira, which was devalued in November to N168/$, has in less than a year, seen further devaluation to N197 on the official inter-bank market. With falling oil prices, investors fear that the currency may be further devalued to a point where it does not have to take so much defending the Naira.

The CBN has imposed strict control on access to foreign exchange as it hoped to build up the Naira profile. In June 2015, it restricted access to foreign exchange for the import of 41 items ranging from rice and tooth-picks as stated by the president.


In a telephone chat with Daily Independent on Wednesday night, Boyo said: “I am happy that the President is on my side. Those foreigners who are not happy with this can go and jump into the lake. This is our country and we need to implement policies that suit us.

“The implication of devaluation of Naira is terribly horrendous; we will become very poor if we try it,” he added.

Odukoya, however, lamented the absence of an economic team that would have best appreciated the scenario, adding that the CBN had been trying to manage the system.

He thinks the decision by JP Morgan to delist Nigeria’s sovereign bonds from its Emerging Markets Global Bonds Index (EM-GBI) might really cause devaluation, just as “if rating agencies also downgrade us.”

“The immediate impact of the JP Morgan issue is that the Nigerian fixed income market, which was a good supply of (US$) in the past, has witnessed an outflow of portfolio investors even before the JP Morgan issue.

“The effect may not be as bad as they anticipate. The good thing I see is that the president has blocked a lot of leakages in government since he came in and this has helped in stabilising the Naira.

“CBN has tried to manage the Naira further by taking some administrative steps on the forex window and this has appeared to stabilise domestic currency in the last few months,” he added.

Continuing, Odukoya believes that at “the initial stage, things will be tough, I will expect the CBN and the MPC (Monetary Policy Committee) to start a downward review of the basic policy rate such that the cost of borrowing and lending should have to reduce within the economy. In the short term, inflation will fly up and the Naira will depreciate and a lot of people will make a lot of noise.

“Banks need to start to fund industries. Nigeria should be feeding Africa with products from here by now and we must do everything possible. When we look at the young population of the country, you will see that something drastic needs to be done to get them engaged.”

Femi Awoyemi, Managing Director, Proshare Nigeria Limited, agrees that the Naira should not be devalued and that the President’s stance is in consonance with other economists and analysts who have already kicked against further devaluation of the Naira, at least for now.

Agreeing with Boyo, a source who craved anonymity, decried the blackmail by JP Morgan to compel Nigeria to commit economic suicide through devaluation or endless free-float of the Naira, thereby increasing the suffering of the masses.

“The so-called foreign investors had divested over $5 billion out of $8 billion they were having in Nigeria. So investors pulling out for now will only deplete our reserves, by about $2.75 billion and we have our peace.”

Economic Team

For the Director-general, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, there is need for the President “to quickly put a body of economic advisers in place.  The President needs to be properly briefed and guided on proper policy choices.  Quality policy decisions are influenced by the context of the economic fundamentals.

“It is the context that would shape the nature and character of policy. Exchange rate is a price. The supply and demand fundamentals are very crucial in the determination of any price. This is time-tested theory in economics. Exchange rate determination is more of an economic issue than political.

“The current liquidity crisis in the foreign exchange market is a symptom of the structural defects in the economy – weak productivity, poor diversification, and uncompetitive real sector, high cost of fund, weak institutions, high import dependence, and avoidable money supply growth, among others.  “Strengthening the exchange rate would therefore require the fixing of these constraints. The current regime of exchange controls would do more harm than good to the economy.”

Also reacting, Marcel Okeke, Chief Economist of Zenith Bank Plc, agrees that the nation’s external reserves would be further depleted as the CBN moves to defend the Naira at all cost.

According to him, since there is no end to the fall of oil price, the forex inflow would be further constrained, just as he expects an increase in the number of items excluded from the official forex market.

The problem, he believes, is that since the current price of the Naira is artificial, foreign portfolio investors are not getting what they ought to in terms of returns, following which they are moving to other climes with more attractive investment returns. Under the same condition, he says, new portfolio investors are not likely to come into the country as it would cost them more to do so.


In a statement last month, the Nigeria Labour Congress (NLC) had asked Buhari to be wary of vested interests, who might want to undermine his electoral promises of ending mass poverty in the country.

A statement by its Deputy President, Comrade Issa Aremu, after a meeting by labour leaders in Kaduna, said devaluation and fuel subsidy removal “amount to policy dictatorship and policy ambush that had nothing to do with the ruling party’s electoral promises which the masses overwhelmingly voted for.”


Addressing a town hall meeting in Abuja in March, Buhari, then Presidential candidate of the All Progressives Congress (APC) recalled how he refused to remove subsidies on petrol and devalue the Naira when he was head of state (1983 to August 27, 1985), because it would destroy the economy.

“When we came into power in December 1983, we were approached by the world power at some stage to devalue the Naira, remove petroleum subsidy and remove subsidy on flour, but we refused.

“The issue was that if we get plenty of Naira, what are we going to do with it? We even stopped farming and the only thing we get money from them was oil and that was being paid in dollars.”

Comments (1)

  • Sep 17, 2015 at 10:37 am Elder (Dr.) Chukwuma Nwaonicha

    The Central Bank of Nigeria’s (CBN) policy of restricting foreign exchange trading may be good or may not be good enough. For sure, Mr. President needs good Advisers because it is painful to keep on devaluing the Niara. What is at stake is the economy of the Nation. It should be noted that the economy is very weak and may not be able to stand against the Dollar based on the fact that Nigeria lacks technology and industrial developments, lacks manufacturing base economy and hi-tech industries. The Nation also lacks infrastructural development in all sector and very low or none economic productivity (unemployment is all time high) coupled with other social problems, all of which make the Naira to be very weak against the Dollar. As noted, the economy depends solely on the stability of oil price; economic diversification/implementation is highly suggested. Those involved should guide Mr. President to the right direction because there is no magic bullet to make the Naira stronger but economic and social developments including good governance and enabling environment for investment both local and international. I believe the Nation needs sound social and economic developments to protect the value of the Naira. Thank you.

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