ABUJA – President Muhammadu Buhari on Friday said that his reason for insisting on no further devaluation of Naira was that the recent ones never paid Nigeria any good.
President Buhari
The president who spoke while meeting with members of the Council of Retired Federal Permanent Secretaries, led by Otunba Christopher Tugbobo at the presidential villa, Abuja stated that he was yet to be convinced by anyone on doing the contrary.
“When I was military Head of State, the IMF and the World Bank wanted us devalue the Naira and remove petrol subsidy but I stood my grounds for the good of Nigeria.
“The Naira remained strong against the Dollar and other foreign currencies until I was removed from office in August, 1985 and it was devalued.
“But how many factories were built and how many jobs were created by the devaluation? “That is why I’m still asking to be convinced today on the benefits of devaluation,” he said.
President Buhari also accepted the Council’s pledge of support for the successful implementation of his administration’s change agenda, especially in the priority areas of improving security, curbing corruption and revitalizing the national economy.
The naira is expected to weaken more on the parallel market but flat on the official interbank market next week as businesses await the signing of the 2016 budget by President Mohammadu Buhari.
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The local currency closed at 320 against the dollar on the parallel market on Thursday, while it traded at 197 to the greenback on the interbank market.
“There is presently a lull in the forex market because of the non-release of the 2016 budget by the government, but we see transactions picking up as soon as the government reveals its economic direction through the budget next week,” one currency trader told Reuters.
Analyst and the Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said although investors and other stakeholders were waiting for Buhari’s final assent to the budget, weak consumer confidence would continue to keep the naira at the current level in the near future.
Meanwhile, the Kenyan, Ghanaian and Zambian currencies are expected to gain ground next week with the cedi recording its first year-to-date gain in recent years after weeks of consistent rally on renewed investor confidence underpinned by improved foreign exchange inflows, according to analysts.
Commercial banks quoted the cedi at 3.8290 to the dollar on Thursday, compared to 3.8350 last week, Reuters reported.
The Ghanaian government had on Monday appointed Abdul-Nashiru Issahaku as the governor of the central bank, promoting him from the deputy position to replace Henry Kofi Wampah, who retired at the end of March, four months earlier than expected.
The Kenya’s shilling is seen firming after weakening on news that the central bank said it had placed Chase Bank under receivership for 12 months to protect depositors, creditors and the public.
“We expect the shilling to regain its lost ground in the coming days as the Chase Bank issue dies out,” a senior trader at one commercial bank said.
The kwacha is expected to remain firm versus the dollar next week due to increased dollar supply from investors attracted to high-yielding government bonds.
On Thursday, commercial banks quoted the currency of Africa’s second-biggest copper producer at 10.2829 per dollar, up from a close of 11.1000 a week ago.
“Stakeholders seek to take advantage of the high investment rates,” the local branch of South Africa’s First National Bank said, predicting a break of the 10.000 psychological level.
The naira rose further on Wednesday against the United States dollar at the parallel market to 300 from 310 on Tuesday.
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The local currency, which closed at 391 against the greenback last Thursday, had risen to 375 and 310 on Monday and Tuesday, respectively.
While linking the recent gain recorded by the naira to significant supplies of forex to the market, forex dealers said the losses recorded by the local currency in recent weeks were “artificial and fuelled by the activities of currency speculators.”
However, a bureau de change operator at the Lagos airport, Mr. AbdulSalam Quadri, said the naira gained marginally on Wednesday, compared to what it gained on Tuesday, because forex supplies to the market were drying out gradually.
He said the local currency might not record any significant gain in the coming days.
However, other forex dealers said the naira might gain further and settle around 260 against the greenback at the parallel market.
“The dollar supply in the market is reducing; however, the naira may gain further significantly before reaching equilibrium,” a BDC operator in Agege, Lagos, Mr. Rotimi Lawal, told our correspondent.
The local currency began its recovery after President Muhammadu Buhari had reiterated its stance not to devalue the local currency on Saturday.
But economic and financial experts said the gains recorded by the naira might not be sustainable in the long run, adding that as demand continued to soar at the parallel market the local currency might plunge further.
The economy of Nigeria, Africa’s largest oil exporter, has been battered by the plunge in global oil prices.
The nation depends on crude oil for over 90 per cent of its forex earnings. The fall in the fortunes of the naira at the parallel market has affected industries.
The CBN has been rationing dollars as part of the measures to preserve the external reserves, which have hit an 11-year low of $28bn.
The Ekiti State Governor, Ayodele Fayose has called for the devaluation of the nation’s currency, the Naira, saying, “With the gap between the official rate of N199 and open market rate of over N400 to one dollar, Naira has already been devalued. Therefore, President Muhammadu Buhari must stop deceiving himself and short-changing Nigerians, especially States and Local Councils in the country with his Forex Policy.”
Fayose vows to lead opposition against APC
Governor Fayose, who said there was no time in the history of Nigeria that the gap between dollar official rate and open market rate was more than N200, pointed out that it made no economic sense for the Federal Government to be calculating the country’s revenue on the basis of the Central Bank of Nigeria (CBN) official rate of N199 to a dollar while States and Local Councils that are sharing the revenue with the Federal Government run their businesses at the open market rate of over N400 to one dollar, thereby causing business to be folding up by the day and prices of goods skyrocketing every day.
The Special Assistant on Public Communications and New Media to the governor, Lere Olayinka, in a statement issued in Ado-Ekiti on Sunday, quoted the governor as saying that apart from breeding corruption through round tripping or foreign exchange arbitrage, Nigerians are also being duped and middle class Nigerians, the main people that grows the country’s economy, are being decimated.
The governor said President Buhari was applying his 1984 failed economic policy in which prices of goods were fixed not minding the cost of supply, such that essential commodities like milk and sugar became scarce and Nigerians were made to line up in the sun to buy rationed commodities.
He urged the President to pay more attention to the ailing economy of the country instead of junketing around the world, wasting $1 million per foreign trip, saying; “President Buhari has travelled to 24 countries in eight months, and will be spending 16 out of the 29 days in February outside the country, with over $500,000 being spent on estacode while the Presidential Air Fleet, which includes fuelling of the planes and allowances for crew members is said to be in the range of $500,000.
“The President’s entourage obviously collect their travel allowances in dollars on official rate of N199 and come back to Nigeria to change it at the open market rate of N400. That must be the reason they encourage the President to be junketing abroad when life is becoming unbearable for Nigerians.”
The governor said, “The situation is such that Nigeria gets say $2 billion revenue in a month, calculates the $2 billion revenue on the basis of the official CBN rate of N199 and share the revenue among the three tiers of government.
“In elementary economics, the implication is that when revenue is calculated based on N199 to one dollar and the federal government will be declaring say revenue of N400 billion to be shared by the three tiers of government, the value of revenue that should have been shared will be over N800 billion at the open market rate of N400 to one dollar.
“Meanwhile, the three tiers of government pay salaries to workers on the basis of N199 per dollar while the workers pay for goods and services which prices are determined by the open market rate of N400 to one dollar.
“Also, Nigeria is now faced with a situation whereby funds are obtained from the official forex market (at lower rates) and diverted to other markets and sold at a higher rate by forex dealing banks and users, who make billions of naira profit just for doing almost nothing.
“Therefore, the reality that we must all accept is that we must allow the forces of demand and supply to determine the value of our currency, not administrative fiat. Most importantly, the government does not have the reserves to keep the naira-dollar rate at its official level.
“The Naira must therefore be devalued. Anything other than this will mean that we are deceiving ourselves with forced foreign exchange rates and it is my position that this regime of deceit must stop.”
LAGOS— The naira, yesterday, depreciated further to N385 per dollar in the parallel market as demand for foreign exchange intensified.
This implies the naira has depreciated by N60 against the dollar this week in the parallel market, when compared with the closing exchange rate of N325 per dollar last Friday.
The currency, however, remained stable at the official interbank foreign exchange market as the interbank rate closed N199.34, yesterday. Thus, the gap between the interbank and parallel market rates widened to N185.66 per dollar from N127.53 last Friday.
Vanguard investigation also reveals that the naira depreciated against the British pounds to N505 per pounds in the parallel market, yesterday, implying N65 depreciation when compared with the closing rate of N440 last Friday.
Investigations revealed that the sharp depreciation of the naira in the parallel market this week is driven by increasing demand by importers sourcing dollars to pay for imports from China. According to a BDC operator, who spoke on condition of anonymity,
“you know China had been on its one month annual holidays. But they resumed work on Monday, and people have to complete payment for goods ordered before the holidays.
“They had made 30 per cent down payment to order the goods and they now have to pay the 70 per cent balance otherwise they will lose the 30 per cent.
That is why they are desperate and ready to buy dollars at any rate. Meanwhile, supply is scarce and those who have dollars are not willing to sell because they might also need the currency soon.”
The naira has been on steady decline since Tuesday, January 12, 2016, when the Central Bank of Nigeria (CBN) stopped weekly dollar sale to BDCs. Prior to this action, the naira traded at N265 per dollar in the parallel market. Consequently, the naira has depreciated by N80 in the parallel market since the CBN took the action.
The steady depreciation was also aggravated by inability of the CBN to meet foreign exchange demand. Vanguard investigations reveal that the parallel market is being bedevilled with demand for foreign exchange from importers of the 41 items excluded from the official market by CBN last year as well as importers of items not excluded from the official market.
NLC to demand N48,000 minimum wage By Babajide Komolafe, Emma Ujah, Yinka Kolawole & Nkiru Nnorom LAGOS—EDO State Governor, Mr. Adams Oshiomhole yesterday called for increase in the number of items excluded from accessing foreign exchange in the country as part of measures to protect the nation’s currency from further devaluation.
Meanwhile, the Nigeria Labour Congress, NLC, said it would soon submit a proposal demanding for a new minimum wage of N48,000, based on the impact of the devaluation of the naira on wages. Speaking in Lagos in the first TheCable Colloquium, titled,
“The Naira on Trial: To devalue or Not,” Oshiomole said that further devaluation will not solve the nation’s problem, especially the appetite for imported goods, which he argued is the real problem bedevilling the economy. Devaluation will not curb importation Citing statistics on foreign trade, he noted that previous bouts of devaluations have not reduced importation of goods or increased exportation as canvassed by proponents of devaluation, as imports have continued to increase despite devaluation of naira.
He said: “More than that, the real critical question that settled this debate is, will devaluation curb our appetite for imported goods? The evidence with CBN shows that prices in the Nigerian economy do not curb the appetite for foreign goods. The last time the CBN devalued from N158 to N198 around 2014, as a matter of fact, our export actually declined by 34.1 per cent and our import increased by 2.9 per cent after that devaluation.
“Now, I can imagine the reason you have this abnormality and this brings us to the initial question. When human being does not labour to earn, they do not spend rationally and because you have so much money, this period also coincided with the period politicians were preparing for election and all the things that politicians have to do.
If a lot of money is accruing to people like that, their spending cannot be rationale, so even if you devalue 300 per cent, it will not curb the appetite of the elite for imported goods, imported toothpicks , frozen chicken, and Brazilian hair.”
Investment bankers prosecuting the naira Oshiomhole noted that the current agitation for devaluation of the naira is been spearheaded by investment bankers, who thrives on currency manipulation and speculations.
He said: “Rather than the government as it used to be in the past indicating its intention to devalue, it is a section of the people that are behind this agitation. Who are these people? The investment bankers who want to trade on bonds and other commercial papers. They don’t want any interference. You can use visas to restrict and regulate the movement of human beings but CBN must not use any instrument to regulate the movement of dollars in or out of the country.”
NLC demand for N48,000 minimum wage In his own contributions, Deputy National President, Nigeria Labour Congress, NLC, Comrade Issa Aremu, warned against further devaluation, saying that previous devaluation has corroded the value of the minimum wage. He said:
“The last time we signed the minimum wage, which is N18,000, which is the current rate, and this was between 2009 and 2010, this translated to $124. But now on account of depreciation alone, this $124 has dropped to less than $60. So wages have been completely eroded on account of devaluation. So in nominal terms, if we are talking just on account of the exchange rate, the minimum wage which is currently N18,000 should be about N48,000. And I am leaving this warning, if you dare devalue again, be sure that labour will also have to hike its own price in the market.”
Forex restrictions threaten 80,000 jobs Meanwhile the Lagos Chamber of Commerce and Industry, LCCI, yesterday, warned that the current foreign exchange restrictions especially the exclusion of 41 items from the foreign exchange market might lead to loss of 80,000 jobs in the manufacturing sector.
This he said was due to inability of manufacturers to access foreign exchange even for items not excluded. Speaking on behalf of the Chamber at TheCable Colloquium, Dr Vincent Nwanem, said: “Is the high rate an issue for manufacturers? No, the major issue now is access. Even the goods that are not listed in the 41 items, our members cannot even fund dollars to fund them.”
CBN, banks lament forex demand for invisibles The Central Bank of Nigeria, CBN, and Deposit Money Banks, DMBs, have cried out over what they considered as abnormal demand for foreign exchange, forex for “invisibles,” especially for school fees and health tourism. CBN’s Director of Banking Supervision, Mrs. Tokunbo Martins, who briefed journalists on the outcome of yesterday’s Bankers’ Committee meeting, in Abuja, said that the monetary authorities would not allow that category of demand to crowd out the real sector of the economy in the forex market.
The naira hit a record low of 325 to the dollar at the parallel market on Thursday as desperate importers scrambled for dollars to meet their obligations overseas.
The local currency had closed at 318 against the greenback on Wednesday, after hitting 313.5 and 310 on Tuesday and Monday, respectively.
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“The dollar is falling because importers need forex to bring in their goods. They cannot keep on folding their arms because there is scarcity; they must keep buying; the only thing is that the quantity may reduce,” a forex dealer told our correspondent under condition of anonymity.
The CBN has left the official exchange rate unchanged at N197 to the dollar on its official interbank window.
“We see the naira falling further in coming days if the central bank fails to lift the dollar restriction,” the Acting President, Association of Bureau De Change Operators, Aminu Gwadabe, said.
Tumbling global oil prices have battered Nigeria’s oil-dependent economy, with external reserves down to an 11-year low at $27.89bn on February 9, Reuters reported.
President Muhammadu Buhari is concerned that further depreciation will hurt poor Nigerians, but the CBN’s refusal to revise the pegged exchange rate has widened a chasm between official rate and the parallel market.
Last month, the central bank halted dollar sales to the BDC operators and allowed commercial banks to accept dollar deposits, in a failed effort to shore up dwindling foreign reserves.
Around 90 per cent of the nation’s foreign exchange earnings come from crude oil exports, but mismanagement of the refineries means the country must also import expensive refined fuel.
The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said it was high time the CBN came up with a forex policy that would address the forex crisis confronting the nation.
In an economic note released on Thursday, Rewane said, “Nigerians are perplexed at the endless slide of their currency, which is now trading at N325/$, the lowest point ever.
“This is happening even when the oil price is up at $31pb. The debate as whether to devalue the naira is not the real issue. The discourse should be whether we need an exchange rate policy or not. The absence of a policy is a recipe for economic anarchy and a race to the bottom.”
Banks have recorded near zero foreign currency deposit inflow from high net-worth individuals indicating that their domiciliary account customers are staying cautious on the reversal of foreign currency deposit ban by Central Bank of Nigeria, CBN, early last week.
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The development has sustained scarcity of foreign exchange in the market as well as the high exchange rate above N300/ USD1
CBN had hoped to buoy foreign currency supply from independent sources through the de-freezing of foreign currency deposits, and hence help douse the pressure on exchange rate which had accentuated last week.
Sunday Vanguard investigations last weekend, however, showed that only low-end domiciliary account holders responded to the policy with a few dollar deposits, a situation which prompted some of the banks to send out marketing sensitization to their customers to come forward and deposit their dollar with them.
Some of the bankers who spoke to Sunday Vanguard expressed surprise that much dollar did not come in during the week contrary to the expectations that customers who had inundated them with inquiry on how to deposit their foreign currencies did not turn up in response to CBN’s directive.
CBN had, mid last year, barred banks from accepting foreign currency deposits from their customers, a development that cut most of the customers napping, with foreign currency cash in their homes, with the attendant danger.
Last week, CBN reversed itself, allowing the deposits but it appeared the domiciliary account depositors have found alternatives.
Some of the bankers told Sunday Vanguard that some of the depositors now trade or invest their dollar cash with Bureau de Changes, BDCs, where exchange rates and returns on investments are far higher, not minding the risks involved.
However, they also explained that some of the bigger volume customers are finding options with foreign bank accounts.
Consequently, the expected inflow of dollar into the domiciliary accounts with local banks did not come as much as was anticipated.
But some financial sector observers said the high volume dollar account customers were skeptical about the policy reversal which was silent on withdrawals.
The CBN foreign currency deposit restriction policies had come with imposition of limits on foreign currency withdrawals, but the unbanning of deposits last week was silent on withdrawals.
This gap, according to the analysts, may have short-circuited the expected positive response from most domiciliary account holders especially the high-end customers.
Commenting on the policy reversal, financial sector analysts at Afrinvest Group said “CBN reneged on its earlier policy, announcing its decision to allow commercial banks accept foreign currency deposits but was not clear on whether foreign currency transfers or withdrawals can be made”.
They are also worried that despite the huge crash in value of the Naira against world’s major currencies, CBN maintained its official rate at N197/ USD1 thereby creating wider parallel market margin of about 50 per cent, the highest so far in the history of Nigeria’s currency market.
Consequently, Afrinvest stated that “this calls for a quick response of the monetary authority given the huge margin between the official and parallel market rates.
“With foreign reserves at lows of US$28.7 billion and oil prices at US$29.47 per barrel, a compelling argument to devalue the Naira at the next Monetary Policy Committee (MPC) meeting cannot be jettisoned”, it stated. Analysts at Cowry Asset Management, a Lagos based investment house, expressed discomfort at the policy reversal which they believe fell short of capturing other factors that would have made it achieve desired results. They stated, “we are worried that the policies of CBN on the foreign exchange management seem to be made in silos as all the ramifications didn’t seem to have been factored in before the announcements, hence the frequent reversals and consequent loss of confidence by the business and investing public.
“We will advice the Monetary authorities to articulate an integrated policy on foreign exchange management taking into consideration the fiscal policy objectives of the federal government.
“We also think that CBN being the recipient and owner of 90% of the country’s foreign exchange earnings must evolve a channel for injecting dollar cash liquidity into the system, to meet legitimate needs”. Concluding its prognosis of the foreign currency market situation, Cowry Assets analysts stated, “this week we expect further depreciation of the Naira at the alternative market segments on aggravated supply scarcity buoyed by the closure of CBN’s window to BDCs”.
The Naira appreciated yesterday to N302 per dollar in the parallel market, thus halting three days of sharp depreciation even as the price of Nigeria’s reference crude oil grade, Bonny Light, slid below the $30 per barrel mark, dropping to $29.47 per barrel.
CBN Governor, Mr. Godwin Emefiele
Meanwhile, following the increasing depreciation of the Naira, the Senate, yesterday, summoned the Central Bank of Nigeria, CBN, Governor, Godwin Emefiele, to appear before it next week.
From N305 per dollar, Wednesday, the parallel market exchange rate dropped to N302 per dollar at the close of business yesterday, indicating N3 appreciation.
President, Association of Bureaux De Change Operators of Nigeria, ABCON, Alhaji Aminu Gwadabe, said that the appreciation was occasioned by drop in demand for foreign exchange and indications that CBN might review its decision to stop dollar sales to bureaux de change, BDCs.
The naira depreciated in the parallel market by N25 naira between Monday and Wednesday, following the announcement by CBN on Monday to stop sales of dollars to BDCs.
Earnings dip
Also, the price of Nigeria’s reference crude oil grade, Bonny Light, slid below the $30 per barrel mark, dropping to $29.47 per barrel, according to data obtained, yesterday, from CBN.
This was even as the price of Brent crude, the benchmark crude oil grade, rose to $30.77 per barrel in the international market. Brent crude had dipped below $30 a barrel on Wednesday, for the first time in more than 10 years, a day after the U.S. benchmark took a similar fall.
Specifically, Brent traded as low as $29.96 a barrel before settling down 55 cents, or 1.8 percent, at $30.31 a barrel on ICE Futures Europe, the lowest settlement since April 2004.
Therefore, using an average crude oil production of 2.2 million barrels per day, as stated by CBN, it is expected that the total amount accruable to the Federal Government and oil companies in Nigeria on a daily basis would dip to $64.83 million, about N12.967 billion daily, using an average exchange rate of N200 to a dollar.
Job loss at BP, Shell, Chevron
Consequently, as a result of the continuous decline in the price of Nigeria’s Bonny Light and other crude oil grades, experts are predicting massive job cuts in the Nigerian and global oil and gas industry in the next couple of days.
Already, the world’s biggest oil companies are slashing jobs and discontinuing major investments, especially as the price of crude falls to new lows.
A report obtained from the Associated Press noted that companies that would be affected by the declining oil price would not only be the big oil producers, but the numerous companies that do business with them, such as drilling contractors and equipment suppliers.
Particularly, companies like BP, which had earlier in the week said it is cutting 4,000 jobs, had already commenced trimming down their operations to cope with the slump in oil, whose price had plummeted to its lowest level in 12 years and is not expected to recover significantly for months, possibly years.
The report had quoted Chevron as saying last year that it would eliminate 7,000 jobs, while Shell announced 6,500 layoffs.
Furthermore, some analysts are forecasting a drop near $10 a barrel, making companies to brace up for more trouble.
In particular, Michael Hewson, chief market analyst at CMC Markets, said: “Calling the bottom in a market is always dangerous, akin to catching a falling knife. But when the clamour for lower prices becomes a stampede, warning signs and alarm bells tend to start going off, which suggests that a more prudent approach might be advisable.”
The uncertainty, the report said, is making companies think twice before sinking money into new oil projects.
“On the North Sea, there is a standstill in the new project, which may create a hole in the pipeline of projects next year,” said Florent Maisonneuve, Managing Director and co-head of Oil & Gas at AlixPartners in Paris.
Subsequently, CBN had in its Economic Report for the Month of October 2015, put the average price of Nigeria’s reference crude, Bonny Light at $49.23 per barrel in October, indicating a 1.3 percent increase relative to the level in the preceding month.
The Nigerian National Petroleum Corporation, NNPC, on the other hand, had stated that of the 18.24 million barrels of crude oil lifted on the account of NNPC in October 2015, 12.07 million barrels and 6.17 million barrels were for domestic and export markets, respectively.
It said: “At an average oil price of $47.45 per barrel and exchange rate of N195.95 to a dollar, the domestic crude oil lifted by NNPC is valued at $572.998 million or a Naira equivalent of N112.279 billion for the period.
“The remaining crude oil lifted for export was valued at $305,856,048.03 at an average price of $49.58/barrel. The total value of crude oil lifted on the account of NNPC in October, 2015 was thus $878.854 million.ý”
Meanwhile, concerned by the increasing depreciation of the Naira, the Senate, yesterday, summoned the CBN Governor, Godwin Emefiele, to appear before it on Tuesday next week at 11a.m., to explain the continuous weakening of Naira against the Dollar.
The development was sequel to a Point of Order raised by the Leader of the Senate, Ali Ndume, APC, Borno South.
The Senate President, Bukola Saraki, who presided over the plenary where the issue was raised, having listened to Senator Ndume, subsequently directed Ndume to convey the Senate’s resolution to the CBN governor.
Monday’s stoppage of foreign exchange sales to Bureau De Change operators by the Central Bank of Nigeria failed to lift the naira on Tuesday as the currency exchanged for 300 against the United States dollar in Kano, 290 in Lagos and 292 in Abuja.
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Financial experts said the naira would decline further, while private sector operators described the move as a welcome development.
The ban was announced on Monday, when naira trading at 285 against the dollar at the parallel market from 278 on Friday.
The Acting President, Association of Bureau De Change Operators, Alhaji Aminu Gwadabe, told one of correspondents in a telephone interview that the currency traded against the greenback at 300, 290 and 292 in Kano, Lagos and Abuja a day after the CBN announcement.
“There is cut of (dollar) supply to the market. The BDC sub-sector has been murdered. We are not coping. The naira is going to head northwards. There is no solution in sight,” Gwadabe lamented.
The Head of Investment Research, Afrinvest West Africa Limited, Mr. Ayodeji Ebo, said the stoppage of forex sale to the BDCs meant that the CBN wanted everybody to apply to the banks for dollars.
He stated, “But we feel the pressure now will move from the BDCs to the parallel market. We will see significant spike in the value of the naira at the parallel market because the little supply to the BDCs have also helped to cushion the demand at the parallel market.
“It will further compound or increase the spread between the parallel market and the interbank market. So, it will also increase round-tripping and unethical practices within the financial system.”
On the lifting of the ban on cash deposits into domiciliary accounts, Ebo said, “I am still sceptical about how this will work except they are also assuring us that if you deposit it, you can consummate business with it.”
A professor of financial economics at the University of Uyo, Akwa Ibom State, Leo Ukpong, said, “I don’t think the stoppage of dollar sale to the BDCs will solve the problem. The currency will depreciate some more.
“This move will make the naira to weaken more as demand for dollar will skyrocket because of the short supply.”
Members of the organised private sector, however, applauded the CBN for the stopping the sale of dollars to the BDCs and lifting the ban on cash deposits into domiciliary accounts.
The President, Manufacturers Association of Nigeria, Dr. Frank Jacobs, said industrialists had earlier kicked against the funding of the BDCs by the central bank, adding that with the development, the forex could be channelled towards funding the real sector in terms of importation of raw materials.
On the removal of the restriction of cash deposits into domiciliary accounts, Jacobs said manufacturers were still waiting for more clarification as to how the money deposited could be utilised by the customers.
The Director-General, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Mr. Emmanuel Cobham, said the forex sale ban was a welcome development.
According to him, although the BDCs are necessary in the economy, they are licensed entities and should, therefore, source for their own funds.
Also speaking on the matter, the Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, lauded the forex policy review, noting that it had addressed the concerns of economic operators.
According to him, it is a source of worry that the CBN continues to maintain its official exchange rate at N199 to the dollar at a time of dwindling forex inflow.
“The pressure on the official window will persist. The risk of round-tripping and distortions in the foreign exchange market will consequently remain high,” he said.
In March 2015, the News Agency of Nigeria(NAN) published a report, which was also syndicated in several Newspapers, that the All Progressives Congress Presidential candidate, Gen. Muhammed Buhari had promised “to ensure that the Naira was equal to the dollar in value, if voted into office”
President Buhari
Buhari made this statement during the South East Presidential campaign rally of his party at the Dan Anyiam stadium in Owerri on Monday, 23rd March 2015. The APC candidate apparently lamented that “it is sad that the value of the Naira has dropped to more than N230 to $1” and he therefore cautioned that “this does not speak well for the Nation’s economy”.
Furthermore, Buhari also assured his vibrant, traditionally mercantilist audience, that ‘corruption would be tackled headlong” if he became President and therefore urged the large crowd of supporters from Abia, Ebonyi, Anambra, Enugu and Imo states, who attended the rally to vote for APC.
Our peoples’ ardent desire for change and the expectation that Buhari would tame the monster of corruption and also strengthen the Naira, as he had promised, ultimately swept the retired General back into office as President. Buhari’s resolve to tackle corruption headlong, is probably evident in the apparent renewed vigor of the Economic and Financial Crimes Commission(EFCC) and the plethora of both old and new case files which are reportedly being processed.
Expectedly, the outrageous media revelations of grand theft have induced public perception that the new Sheriff will arrest the pervading impunity in governance and the brazen misapplication of public funds. It is probably too early, after barely eight months, to expect convictions and other appropriate penalties that would convince Nigerians that Buhari is actually the real deal and that he would deliver on his campaign promise with regards to corruption.
Instructively, however, Buhari may have also realised that unless the usual often protracted judicial process for the prosecution of financial crimes is promptly, radically reformed, some of the heavy weight corruption cases the EFCC is currently handling may sadly take forever to conclude.
Indeed, even if popular expectation still remains upbeat that corruption will become minimal and that indicted treasury looters will receive appropriate punishment, there is, certainly still no glimpse of hope that Buhari’s promise of making Naira equal in value to the dollar will materialise.
In this event, the Naira will remain increasingly rejected as a safe store of value, while an obviously bloated dollar demand will persistently burst the ranks of the official Naira exchange rate; for example, the wide margin of over N70/dollar which now exists between official and parallel Naira exchange rates, in the money market, would invariably also promote rent seeking and distort resource allocation with adverse consequences on inclusive growth and job creation.
Expectedly, the knee jerk reactions of CBN’s monetary strategies have turned out to be counter-productive to the dwindling Naira exchange rate. It is ironical that the same Buhari who condemned an exchange rate of N230=$1 in Owerri in March this year, has curiously, remained mute on the dismal fate of the Naira which currently trades officially at N197=$1 when the parallel market, in December 2015, simultaneously parades rates which exceed N265=$1, with still no respite in sight, in an economy that is presently, clearly unraveling and awash with surplus Naira.
In the above event, some critics may conclude that Buhari’s Naira lamentation during the campaign trail was probably just crocodile tears to win critical electoral votes that would bring victory to his party and also return him to power. Some observers may however, suggest that Mohamed Buhari probably did not fully understand the economic dynamics that predicate the Naira’s exchange rate mechanism, when he made the campaign promise to reinvent a rate of N1=$1! Nonetheless, party stalwarts would claim, in defense of their principal, that no one outside the previous government could have foreseen the depth of dysfunctionality in the economy before PMB took over.
What is presently clear however, is that, Buhari’s administration obviously has no viable solution that would arrest the slide in naira exchange rate or even reduce the widening gap between official and parallel market exchange rates.
However, the current crash in crude prices and the need to fund the projected N2Trillion 2016 budget deficit, in addition to servicing an already discomfortingly heavy debt burden with the related oppressive rates, and with the intense pressure from local as well as international financial and banking moguls to further devalue the Naira, Buhari will become increasingly pressurised and may capitulate and further devalue an already beleaguered Naira by at least 25%, to exchange above N250=$1.
Clearly, such devaluation will inevitably further fuel the already oppressive, prevailing double digit inflation rate and invariably sadly aggravate mass poverty. Instructively, also, even though, crude oil price has crashed below $35/barrel to induce fuel prices below N90/litre without subsidy, nevertheless, if the Naira officially exchanges above N250=$1, the pump price of fuel will spike well above N130/litre and extinguish any hope that Buhari’s government will ever be able to abolish the contentious humongous annual subsidy values on petrol.
Indeed, the recent supplementary budget of well over N500bn to liquidate outstanding subsidy debts to marketers may have alarmed everyone who expected the ‘Honest one’ to frontally confront and eliminate the popularly alleged subsidy fraud which has reportedly drained our Treasury of over $35bn between 2010-14.
Nonetheless, in the light of PMB’s exemplary integrity rating, it is unlikely that he deliberately set out to deceive Nigerians, when he promised to “ensure that the Naira was equal to the dollar in value if he was voted into office”. Instructively, however, so long as the market dynamics of eternally surplus Naira and auctions of dollar rations subsists, it would be hopeless to expect that the Naira slide will be reversed .
Conversely, if the CBN does not devise other means for instigating excess Naira liquidity in the money market, the adoption of dollar warrants for allocations of dollar denominated incomes will steadily bring down the dollar rate below N100=$1 before December 2016.
Indeed, if the Naira appreciates to N100=$1, it would also become advisable to redefine the Naira profile by redecimalizing the domestic currency with two decimal points so that N100 becomes N1. Thus, a new currency profile with more valuable primary kobo coin denominations will become available to promote competitive pricing of goods and services.
In addition, if N1=$1, the highest Naira denomination would be N50 note which would be the equivalent of $50 rather than the current N1,000=$5 with the attendant problems of hygiene, and portability which discourage public acceptance, particularly for lower denomination notes and the unwieldy primary coins which have abysmally infinitesimal values.
There appeared to be a significant respite for Naira as it strengthened against the US Dollar in the unofficial currency market a day to the public holidays after suffering severe depreciation daily for three consecutive weeks.
As at close of business yesterday, the local currency gained 3.64 per cent relative to the greenback, USD, to close at N265/USD1.0 from N275/USD.0 in the preceding week at the Bureau De Change, BDC, market segment.
Similarly, the local currency appreciated by 3.57 per cent of its value relative to the USD at the parallel market segment to close at N270/USD1.0 up from N280/USD1.0 in the previous week.
Currency dealers told Vanguard that the development came on a temporal supply boost by homecoming diaspora Nigerians for the festive season.
However, the Central Bank of Nigeria, CBN, clearing rate and interbank rate closed steady at N196.97/USD1.0 and N199.1/USD1.0 respectively.
The naira fell to 257 against the dollar at the parallel market on Thursday. The local currency had traded against the greenback at between 251 and 252 on Wednesday.
N100 note
The naira has been falling since last Wednesday when the Central Bank of Nigeria stopped the sale of foreign exchange to some Bureaux de Change operators for failing to render returns on the utilisation of previous forex purchases.
The exclusion of the BDCs from the weekly forex sale, which continued on Wednesday, has been creating shortage of dollars, causing the greenback to rise at the parallel market.
However, the local currency traded at 198.97 to the dollar at the official interbank market on Thursday. The naira-dollar exchange rate has been moving between 197 and 199 at the official interbank market since February.
The central bank had sold $30.5m to 1,017 BDCs on Wednesday but excluded around 1,801 others from its weekly sale.
“We are in contact with the central bank to resolve issues around the exclusion of some of our members from forex sales and we are expecting a positive response,” the President, Association of Bureau De Change Operators, Mr. Aminu Gwadabe, said while reacting to the development.
The CBN Governor, Mr. Godwin Emefiele, on Thursday said at the annual Bankers’ Committee retreat in Lagos that the fall in oil prices had created pressure on the external reserves and the exchange rate.
LAGOS — Activities at the retail segment of the official foreign exchange market were grounded, yesterday, as end users avoided bureaux de change (BDCs), to avoid submitting their Biometric Verification Number (BVN) for foreign exchange transactions.
N100 note
This, however, resulted in sharp increase in demand for dollars at the black market, prompting the naira to depreciate to N230 per dollar from N225.
Recall that the Central Bank of Nigeria (CBN) made the BVN a criteria for sale and purchase of foreign exchange by banks and bureaux de change (BDCs) effective November 1.
Vanguard investigation, however, revealed that instead of foreign exchange end users submitting their BVN to BDCs as mandated by the CBN, most of them moved to the black market for their foreign exchange needs. This in turn increased demand in the market, prompting the parallel market exchange rate to rise to N230 per dollar from N225 at the close of business on Tuesday.
Confirming this development to Vanguard, Mr. Harrison Owoh, Chief Executive Officer, H.J Trust BDC said that “most of the customers were not willing to submit their BVN due to fear of what it might be used for. This has slowed down sales of forex by BDCs because we can’t sell without obtaining the BVN.”
An Abuja-based BDC manager, who spoke to Vanguard on condition of anonymity said that the problem was severe in Abuja, with BDCs having difficulty selling the dollars purchased from the CBN, last week.
“As I am talking to you, most BDCs in Abuja may not take dollars from CBN today (yesterday) because we have not sold the ones we bought last week. The customers do not want to submit their BVN for security reasons. They are patronising the black market, that is why the rate has gone up sharply, and I can tell you, the rate might rise higher if the situation persists.”
President of Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, however, blamed the situation on lack of adequate awareness on the part of the CBN before implementing the policy. He said that while ABCON, as a partner in progress with the CBN supports the use of BVN as criterion for foreign exchange transactions, the association had, however, called the attention of the apex bank to the need to delay implementation to allow massive publicity to create awareness among the populace.
“We had predicted what is happening now, that in the absence of adequate awareness, patronage will shift to the black market, leading to depreciation of the Naira in the market”, he said.
Submitting BVN not security threat—CBN
Director, Corporate Communications Department of CBN, Alhaji Ibrahim Muazu wondered why anybody should be afraid of submitting BVN for transactions, adding that there was no threat in giving BVN for foreign exchange transactions.
According to him: “This probably has to do with people with illicit flows, and not for fear of the BVN itself. And for people with illicit flows, they are avoiding documentation, the way they avoid the banks.
“To us, if not for the likely impact on the black market, it is a good development because it means the foreign exchange market is now demand driven. For example, if you go to the banks for ‘Form A’ foreign exchange transactions, it requires more than the BVN.
Submitting BVN for transactions is not a security threat. The BDCs cannot access the account details of their customers; they would just have the BVN for reporting purposes.
“The BVN is just an identity; the BDC cannot see your account details. It is just like asking you to submit your passport photograph. And the purpose is to make sure that people don’t buy foreign exchange above the limit allowed by the law.
There is a limit of $4,000 per individual per quarter. If one person buys $4,000 from one BDC, and another $4,000 from another BDC, there is no way anybody can verify it is the same person. All these things are supposed to be controlled by the BVN. All we want to clarify is that there is no threat in giving your BVN, it is an identity, in as much as you can give your passport photograph or even utility bills, as required for operation of dormant account.
“It is unfortunate if they are going to the black market and the black market does not have enough supply; but for us if they don’t buy from the CBN, if the CBN dollar is not sold, it would come back to us or there would be no demand for dollars next week, and this means we are conserving reserves. The only problem is the funding source for the black market will be limited and the price is high. But if I can give my BVN and buy dollars, maybe at N200, why should I go to black market and buy at N250? So the genuineness of the transaction is clear.”
Background to policy
The policy of making BVN criterion for foreign exchange transactions should have taken off August 15,2015 but was suspended by the CBN following criticism and warnings on the likely impact on the exchange rate of the Naira, and also to allow the Nigeria Interbank Settlement System (NIBSS) provide multiple channels for BDCs to verify BVN submitted by foreign exchange end-users.
The purpose of the policy, according to a CBN circular issued on October 20, was to stabilize the forex market, stem the rampant cases of forex leakages and illicit money transfers from Nigeria.
The CBN circular
The circular stated: “All banks and licensed BDCs operating in Nigeria as well as the general public are, therefore, put on notice that with effect from November 1, 2015, all customers desiring to purchase forex through all available channels in Nigeria must provide their BVN, which shall be validated by the CBN authorised forex dealer through the Nigerian Interbank Settlement System platform before the transactions are consummated.
“For the avoidance of doubt, the CBN shall from November 1, 2015, discontinue sale of forex to the BDCs that had not availed it the BVN of all its directors. Any authorised forex dealer that fails to provide the required information in its returns or provides a wrong BVN would be penalised and this may include the termination of the forex dealership authorisation.”
Consequently, on Monday, October 26, NIBSS unveiled a USSD and internet channel for verification of BVN. According to Mr. Oluseyi Adenmosun, the BVN Project Coordinator for NIBSS, BDC operators or anybody can dial the short code *565*1# on their phones from any part of the world for the validation. The USSD code when dialed will pop up a message asking for the BVN and the date of birth of the BVN holder to confirm the genuineness of the BVN. The BDC operators also have the option of using the NIBSS website portal for the validation. The service costs N20 per enquiry.
CHAMPIONS of devaluation may have lost the battle following the Federal Government’s resolve to retain the naira value against the dollar.
Prof. Yemi Osinbajo
The naira currently exchanges for N197 to the dollar at the official market.
Vice President Yemi Osinbajo said yesterday that devaluation is not the appropriate option under the prevailing economic realities.
Many experts, including former Central Bank of Nigeria (CBN) governor and Emir of Kano Muhammad Sanusi II have been advocating devaluation of the currency.
According to Sanusi, the “current value of the naira is unsustainable”.
But Osinbajo, while receiving some envoys and officials of Citybank led by Mr. Jim Cowles, in Abuja, said: “Devaluation is no solution as far as the Buhari administration is concerned”.
Osinbajo, who also received Italian Ambassador to Nigeria, Mr. Fulvio Rustico and the Canadian High Commisioner in Nigeria Mr. Perry John Calderwood, said: “It is not a solution, we are not exporting significantly. And the way things are, devaluation will not help the local economy.”
He added: “What we need to do is to start spending more on the economy and then things will ease up a bit.”
The issues around the economy, Osinbajo said, were no exact sciences, stressing that what is important is to be reasonably flexible in dealing with them.
He outlined the government’s plans to set-up a $25 billion Infrastructural Fund to be sourced from local and international sources including through Nigeria’s Sovereign Wealth Fund and the pension fund, among others.
The Vice President said other sovereign wealth funds have indicated interest in the fund which would be used to address the nation’s decaying road, rail and power infrastructure. “This is our approach to speeding up the country’s infrastructural development.”
Osinbajo described as temporary measure the current foreign exchange restriction, adding that it is to ensure that “we don’t deplete our foreign exchange substantially,” at a time when oil prices are falling in the international market.
The restriction is also to bring some stability to the foreign reserves without which Foreign Direct Investment (FDI), might be affected.
To him, FDI is more forward looking than portfolio investments, which are being affected by the decision to manage the foreign exchange resources of the country at this time.
“I am not sure devaluation is the issue, but how to ensure foreign direct investment which is more useful, “ the vice president said, adding that he expects a bit more stability and direction in the next few months.
He said the government would work with the CBN to ensure that legitimate businesses are not badly impacted by the current foreign exchange restrictions, especially those who have previous contracts and loan commitments.
Former central Bank of Nigeria, CBN Governor, Sanusi Lamido, has called on his successor to devalue the naira and warned that Africa’s biggest economy is in danger of a long term slump unless the government confronts slowing growth.
Sanusi Lamido
“Let’s stop being in denial, we cannot artificially hold up the currency,” Sanusi, now the Emir of Kano, Nigeria’s second-ranked Muslim leader, said in a speech he delivered on Thursday in Lagos broadcast on CNBC Africa. President Muhammadu Buhari “needs help on the economy,” he said. Buhari has said he opposes a weakening of the naira.
Under current Governor Godwin Emefiele, Nigeria’s central bank has curbed dollar funding since March, virtually fixing the exchange rate, even as other oil exporters from Russia to Colombia and Kazakhstan have let their currencies weaken. Nigeria derives two-thirds of government revenue and 90 percent of export earnings from sales of the commodity. Limiting access to dollars has stabilized the naira, which has closed at about 198-199 per dollar since declining about 8 percent in the first quarter.
The central bank’s rationing of hard currency and restrictions on foreign-exchange trading are hurting the economy, said Sanusi, 54. The economy expanded 2.35 percent on an annualized basis in the second quarter, the slowest pace since at least 2010.
Industry Deprivation
“We are depriving certain key industries of imports,” he said. “If we have to make a choice between economic growth and a devaluation, my recommendation is that we protect growth.”
Monetary officials should lower the key interest rate from a record high of 13 percent to help stimulate the economy since the government lacks the funds to boost spending in the face of lower oil prices, Sanusi said. Nigeria is Africa’s top crude producer.
“The portfolio flows are gone,” he said. “Inflation is already upon us. You have fiscal consolidation. It is time to loosen monetary policy. Otherwise we compound an exchange rate crisis for businesses with high borrowing costs and declining demand.”
Investment Outflows
Portfolio investors have fled Nigeria, with foreign holdings of naira government bonds falling to less than 10 percent of the total from 27 percent in 2013, according to Standard Chartered Plc. Sanusi also called on the ministers who will serve in Buhari’s cabinet not to act like “courtiers.”
“I hope people will have the courage to know that loyalty is about telling your boss the truth,” he said. Buhari, who came to power in May, has nominated ministers, although he hasn’t publicly unveiled their portfolios, and the Senate has to approve the nominees.
Sanusi, who became governor in 2009, was suspended by former President Goodluck Jonathan in March 2014 after he accused the state oil company of withholding billions of dollars from the government.
He won praise from investors for cleaning up the banking sector after a crisis in 2009 and attracting more bond and stock investment from abroad.
“Lamido Sanusi, being an expert, has his ground for saying this,” Ibrahim Mu’azu, a spokesman for the central bank in the capital Abuja, said by phone. “The central bank may look into what he is saying.”
The naira should not be devalued further, President Muhammadu Buhari said on Wednesday, despite the Central Bank of Nigeria’s growing struggles to keep the naira at current levels.
President Buhari
The nation’s revenue has been hit hard by the fall of global crude prices, and the CBN has imposed increasingly strict foreign exchange rules to save the external reserves and avoid what would be the third devaluation in one year.
The central bank had devalued the naira in November last year and February this year.
Despite the CBN’s uphill struggle to keep the naira from falling further, Buhari believes the naira must not be devalued.
“I don’t think it is healthy for us to have the naira devalued further,” Buhari said in an interview with France 24.
“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 toothpicks and rice, Nigeria can produce enough of those,” he said.
The naira had fallen to as low as 242 per dollar on the parallel market in July, versus the official rate of 197. It has lost around 15 per cent against the dollar over the past year with the official devaluation in November and a de facto one in February.
In June, the CBN restricted access to foreign exchange for the import of 41 items ranging from rice and toothpicks to steel products and glass.
The stringent restrictions have not gone down well with investors, who have called for a relaxation.
Last week JP Morgan said it would remove Africa’s biggest economy from its influential emerging markets bond index by the end of October, citing a lack of liquidity and the central bank’s currency restrictions.
But Buhari’s position conflict with those of some local and foreign economists and analysts, who believe the naira must be devalued.
Economist and Chief Executive Officer, Financial Derivatives Limited, Mr. Bismarck Rewane, said the expulsion of Nigeria from the global bond index by JPMorgan might have reduced pressure on the CBN to devalue the naira but the ultimate issue might be for the CBN to devalue the naira.
He said, “With the battle to stay on the index having been lost it, there is less urgency to devalue the currency and remove forex restrictions. Further FX restrictions may even be imposed in the near term as the CBN tries to conserve foreign reserves. Nevertheless, we believe a devaluation has become even more imminent considering the need to boost investor confidence in an economy heavily reliant on dwindling oil revenues.”
The external reserves fell by three per cent to $30.69bn by September 14, from $31.63b a month earlier, central bank data showed on Wednesday.
The reserves were down 22 per cent from a year earlier.
The central bank ate up much of its reserves to support the local currency, selling dollars to bureau de change operators twice weekly in a bid to narrow the gap between the official and unofficial exchange rate. The bank cancelled the auctions in February.
The presidency has thrown its weight behind the Central Bank of Nigeria (CBN) on its decision not to devalue the naira and lift its currency curbs, which culminated in the decision on Tuesday by US investment bank JP Morgan & Chase to phase out Nigerian government bonds from its Government Bond Index for Emerging Markets (GBI-EM) by the end of October.
N100 note
Speaking on the issue to THISDAY on Wednesday, a top presidency official who preferred not to be named, said the CBN, Federal Ministry of Finance and Debt Management Office (DMO) had the endorsement of the presidency in their joint statement reacting to JP Morgan’s announcement on the delisting of Nigeria’s bonds from its indices starting from September 30.
The official while acknowledging that JP Morgan had raised concerns over liquidity in Nigeria’s currency market, he argued that the joint statement by the finance ministry, CBN and DMO showed that the federal government was not in support of the devaluation of the naira as this would lead to a further spike in inflation and to the export of jobs.
He quoted JP Morgan as stating that “foreign investors who track the GBI-EM series continue to face challenges and uncertainty while transacting in the naira due to the lack of a fully functional two-way FX market and limited transparency”.
“However, CBN, the finance ministry and DMO made it clear that it introduced an order-based, two-way forex market,
resulting in the stability of the exchange rate in the interbank market over the past seven months and largely eliminated speculators from the market.
“The CBN also enhanced transparency by mandating that all forex transactions are posted online on the Reuters trading platform so that all stakeholders could easily verify all transactions in the market.
“All this was done to ensure that participants are not allowed to simply trade currencies, speculate against the naira and engage in round-tripping, but are only in the market to fulfill genuine customer demand to pay for eligible imports and other transactions.
“Yet, JP Morgan’s preference is for Nigeria to devalue its currency in the face of falling oil prices and dwindling reserves in order to satisfy foreign portfolio investors who do not have Nigeria’s interest at heart,” he said.
The official said if the central bank had succumbed to JP Morgan and foreign investors’ sentiments, this would have led to a massive depreciation of the Nigerian currency, leading to import-induced inflation, exporting jobs, and the continued depletion of Nigeria’s foreign reserves.
“Lest we forget, there is a high possibility that the US Federal Reserve could raise interest rates very soon and with the economic problems in China, foreign portfolio investors will exit the Nigerian economy without a second glance.
“Should we deplete our reserves now, how will we meet their demands when they elect to exit the Nigerian market in droves for other destinations?” he asked
The presidency official added that another major concern for the federal government was the fuel subsidy regime.
“Devaluation at this time will be disastrous because since the fall in the price of crude oil over a year ago, foreign exchange differentials alone today account for almost 50 per cent of the subsidy bill that is paid by the federal government to oil marketers.
“Bank charges and interest rates account for another 25 per cent while the difference between the actual market price of petrol and the official price stipulated by government, which is the real subsidy element, accounts for another 25 per cent of the total subsidy bill.
“So should the CBN devalue, the foreign exchange differential will rise and put more pressure on the government’s finances,” he explained.
The official added that going back to the two-way quote system demanded by JP Morgan would have adverse consequences on the little foreign reserves Nigeria has, which provide cover for only five months of imports.
“So we are concerned about all this and will continue to support the CBN to encourage market stability over a sustained period and meet demand for only legitimate transactions,” he said.
He noted that whilst the federal government considered the inclusion of Nigeria’s bonds on the JP Morgan GBI-EM index good for the integration of the Nigerian economy with other global markets, “but if remaining on it would amount to devaluing the naira, increasing inflation, exporting jobs and depleting our reserves, it is not worth the bother. It would amount to a vanity project not in Nigeria’s best interest”.
He assured THISDAY that as the federal government moves to block more leakages in the public sector and unfold its economic agenda in the weeks ahead, Nigerians would begin to feel the gains of its policies.
“The government and CBN’s primary responsibility is to enunciate policies that would reverse the decline in the country’s GDP, create jobs and keep inflation low.
“A devaluation of the currency will hamper these objects. So if the price we have to pay for this is our ejection from the JP Morgan index, it is a temporary price we will have to live with until our finances improve,” he said.
The House of Representatives on Tuesday summoned the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, over the apex bank’s decision to bar deposit banks from accepting cash dollar deposits.
CBN Governor, Mr. Godwin Emefiele
The House resolution simply directed Emefiele to appear before the House to “explain the confusing policy.”
It was a day the House passed a separate motion seeking to investigate and “ascertain the state of Nigeria’s economy.”
A member from Akwa Ibom State, Mr. Emmanuel Ekon, who drew the attention of the House to the foreign exchange policy under matters of urgent public importance, said different actors in the finance sector were giving interpretations to the policy as it suited them.
Ekon cited a situation in which he claimed that banks were rejecting deposits for transfers for medical purposes.
“It is a very serious issue; you cannot even transfer money for medical services abroad,” he added.
Another lawmaker from Anambra State, Mr. Chris Azubogu, complained that his brothers in Nnewi, who engaged in import business, had been bombarding him with telephone calls since the policy was announced by the CBN.
According to him, the banks too did not seem to understand what the directive implies as they “resort to measures that are entirely unnecessary.”
Azubogu also alleged that some firms could be forced to lay off workers if delays in moving funds meant that they could not finalise their import transactions.
On his part, the Deputy Whip of the House, Mr. Pally Iriase, told the House that he did not see how the policy would shore up the value of the naira.
“The policy is so confusing to virtually everybody.
“How does it impact on the foreign exchange rate?” Iriase asked.
A move by some members to stop the motion on the grounds that it was not important was halted by the Speaker, Mr. Yakubu Dogara.
The Speaker, like some of his colleagues, also admitted that he was confused about the policy.
“Myself, I must say that honestly I am confused too. Let the CBN governor come and explain what this is about,” he ruled on an order seeking to stop the motion.
But Abubakar Blata argued that anybody describing the policy as confusing was not telling the truth.
Blata recalled that the CBN merely invoked the powers conferred on it pursuant to its Act by introducing a policy that could possibly shore up the value of the naira against the US dollar.
“There is no confusion in this policy.
“The CBN is looking for ways to rescue the naira from total collapse,” he said.
The House Whip, Mr. Alhassan Ado-Doguwa, advised members to support the motion and allow Emefiele to come and give explanations.
“There is no problem in allowing him to come and make the explanations.
“The explanations may lay the confusion to rest. Recall that when the CBN came up with the cashless policy, similar reservations were expressed.
“But after the former CBN governor (Lamido Sanusi) came here to speak on it, a lot of nerves became calmed,” Ado-Doguwa added.
The sponsor of the motion on the state of the economy, Mr. Bede Eke, stated that the investigation had become necessary on the heels of conflicting statements by government officials on the true state of the economy.
He cited a case in which President Muhammadu Buhari told the nation that he inherited a near-empty treasury, but went ahead to approve N804.7bn as bailout fund for states and local governments.
The Federal Ministry of Finance, the CBN and the National Planning Commission and other agencies of the Federal Government are to appear before the House in the course of the investigations.
