The Nation Newspaper

Tag: devalue

  • ‘Nigeria may devalue naira this year’

    ‘Nigeria may devalue naira this year’

    Nigeria will devalue its currency, the naira, later this year in an effort to improve liquidity and close the gap between the official and exchange parallel markets, a Reuters poll has shown.

    That expectation by seven of the nine economists polled this week comes even though Central Bank of Nigeria (CBN) Governor Godwin Emefiele has said he would not devalue the naira.

    An analyst and investor at Rich Management in Nairobi. Aly-Khan Satchu, said: “The possibility of a devaluation is certain; the question is the timing. They are eventually going to capitulate at some point this year, a similar scenario to Egypt at the end of last year – a big devaluation in the official rate.

    “Nigeria stubbornly held on to an official peg of 197 naira to the dollar for 16 months, until June of last year, hurting the economy. It subsequently floated the currency but maintained some measures to prevent further weakening. The naira currently trades at 305 per dollar. Dollar shortages meant the currency fell to close to 500 against the dollar last week on the unapproved open retail market.”

    Satchu said keeping the currency artificially high is effectively stalling the economy and making investment difficult.

    The CBN is expected to leave its benchmark interest rate unchanged on Tuesday, and for the rest of the year, at 14 per cent to halt rising inflation and support growth, the wider poll of 12 economists also found. After the apex bank added 300 basis points to borrowing costs last year to try and tame soaring prices, all 11 analysts surveyed said they expected it to keep its benchmark rate on hold next week. Inflation was uncomfortably high at 18.55 per cent in December, its highest in more than 11 years and the 11th straight monthly rise.

    Galloping inflation comes as Africa’s largest economy grapples with its first recession in 25 years, largely caused by the decline in global oil prices since 2014. Crude oil sales account for 70 per cent of government revenue. Inflation is expected to average 15.2 per cent this year and slow to 11.0 per cent in 2018.

    Cobus de Hart of NKC African Economists in a client note, said:“High inflation, however, remains the main stumbling block at this stage, but the CBN may become more willing to gradually loosen its grip on the naira as inflationary pressures start to ease somewhat this year.”

    The economy is expected to grow 1.5 per cent this year and 2.9 per cent next, although the most bearish analyst said it is possible the economy will contract 1.5 per cent this year.

  • CBN insists it won’t devalue naira

    CBN insists it won’t devalue naira

    The Central Bank of Nigeria (CBN) said yesterday that those campaigning for further devaluation of the naira, or speculating it has already devalued the local currency should have rethink.

    There were speculations that the CBN would devalue the naira, as a last resort to ongoing economic crisis and will come immediately after raising fuel prices.

    But CBN’s Acting Director, Corporate Communications, Isaac Okoroafor, dismissed speculations that the naira was already devalued further, saying the speculations are unfounded.

    Speaking yesterday with The Nation, the apex bank’s spokesman said the regulator will not, and has not devalued the naira. “Naira has not been devalued. The naira devaluation rumour is untrue,” he said.

    But amidst devaluation uncertainties and shortages of forex, most foreign investors remain cautious about entering the Nigerian market whilst currency and reinvestment risks linger.

    Analysts at FBNQuest, the investment arm of First Bank of Nigeria Holdings Plc, said a devaluation as a last resort is on its way although the CBN has stiffened its defense of its exchange-rate policy. “We see devaluation under duress and a year-end interbank rate of N230,” it said.

     

  • MPC member urges CBN to devalue naira

    MPC member urges CBN to devalue naira

    A member of the Monetary Policy Committee (MPC), Adedoyin Salami, has advised the Central Bank of Nigeria (CBN) to devalue the naira.

    According to the minutes of the MPC released yesterday, he argued that the naira should be devalued and allowed to trade within a band, saying the fixed exchange rate would not work alongside a planned rise in government borrowing.

    According to the minutes of the 12-member MPC January meeting, Salami said the naira was 10 per cent over-valued and voted to move the exchange rate band to plus or minus five per cent from N220. The naira trades some 40 per cent below the official rate on the black market against the dollar.

    But Salami’s proposal gained no support at the meeting while the CBN was focused on exchange rate stability at the expense of inflation.

    Nigeria faces its worst economic crisis for decades as the falling prices of oil has slashed revenues, prompting the CBN to peg the currency and introduce measures to conserve foreign exchange reserves which has fallen to more than 11-year low.

    “The absence of an exchange rate management policy has diminished Nigeria’s attractiveness as a destination for international capital flows,” he said.

    Other policymakers voiced concerns that tight liquidity in the currency market could threaten economic growth this year as businesses struggle to get dollars for imports. They all voted to keep benchmark interest rate at 11 per cent in January.

    The CBN last year pegged its exchange rate to curb speculative demand for the dollar and conserve its dwindling foreign reserves after it restricted access to hard currency for imports of certain items, frustrating businesses.

    Last month, the International Monetary Fund (IMF) urged Nigeria to lift the measures imposed by the central bank last year and allow the naira reflect “market forces” more closely, as the restrictions had significantly affected the private sector.

    However, President Muhammadu Buhari has rejected calls by the IMF to lift foreign exchange restrictions and allow a more flexible rate for the naira in support of the apex bank’s actions.

    The tight controls have forced domestic lenders to delay hard currency loan and trade repayments to foreign banks and increased the risk of default, bankers say. Nigeria wants to borrow up to $5 billion to fund its 2016 budget deficit but the minutes showed that all 12 committee members warned that spending should not increase after the loss of vital oil revenues to curb inflation and enhance debt ratios.

  • Don’t devalue naira, traders urge Buhari

    The President, National Association of Nigerian Traders (NANTS) Ken Ukoaha has urged  President Mohommedu  Buhari not to devalue the naira, stating that it is the  only way the people can patronise made-in-Nigerian products.

    Ukoaha made this appeal during the International Women’s Day in Abuja, with  Empowering Nigerian Women Through Patronage of Made-in-Nigeria Products as its theme.

    He said there is need to celebrate the women especially the Nigeria women.

    He said: “The government must not devalue the naira, our currency has nothing to fight against the dollar, we are not dollar dominated human beings; God did not make a mistake by making us Nigerians and therefore we are proud of our naira.

    “Nobody should attempt to devalue the naira;  let us build our industry; let us build our farmers; let us build our small scale farmers and small scale producers and in so doing if we eat what we produce and wear and buy what we produce then all of us will be lifted up, our economy will be lifted up.