Nigerian President Rules Out Further Currency Devaluation

  • Central bank is making FX available to 'essential' services
  • Businesses struggling to access dollars, Stanbic chairman says

Nigerian President Muhammadu Buhari said he opposed a weakening of the currency of Africa’s biggest oil producer and endorsed the central bank’s policy of restricting foreign-exchange trading.

"I don’t think it is healthy for us to get the naira devalued," Buhari said in an interview in Paris with France 24 broadcast on Wednesday. The central bank is providing ample foreign exchange to “essential services, industries,” he said.

After a halving of oil prices in the past year, Central Bank of Nigeria Governor Godwin Emefiele reacted to the naira’s drop to a record low in February by extending trading curbs and introducing bans on purchases of dollars by certain importers. While the currency has since stabilized, foreign investors, local businesses and even some of Emefiele’s fellow Monetary Policy Committee members have complained that it is overvalued.

Currency controls have left Nigerian companies unable to source the dollars they need to pay foreign suppliers, according to Atedo Peterside, chairman of Stanbic IBTC Holdings Plc, the local unit of Africa’s largest lender, Standard Bank Group Ltd.

“People underestimate the problems that exchange rate systems can pose to businesses,” Peterside said in an interview on Wednesday in Lagos, the commercial capital. “Instead of doing business, they’re devoting 40 percent of their time to scouting around for dollars, pulling crumbs together.”

Nigeria’s economic growth slowed to 2.35 percent on an annualized basis in the second quarter, down from 6.54 percent a year earlier. The central bank’s policies are partly to blame and have hurt manufacturers, according to Renaissance Capital.

Doyin Salami, an MPC member who criticized the regulator’s decision in June to stop importers of about 40 items from accessing foreign exchange markets, said Nigeria would soon have to change its stance on the naira. It could not carry on trying to maintain a fixed exchange rate, independent monetary policy and free movement of capital, he said.

Market Choices

“You’re allowed to choose two out of the three,” he said in a speech in Lagos on Wednesday. “The key question is which two will Nigeria choose. That will have to be answered in the coming months. I would rather Nigeria maintain independent monetary policy and have a market-determined exchange rate.”

Muhammadu Buhari
Muhammadu Buhari
Photographer: Eric Piermont/AFP via Getty Images

Buhari, who has yet to name a cabinet since he took office at the end of May, also said markets weren’t being harmed by the delay in ministerial appointments, which he says will happen by the end of the month. Civil servants are running the government of Africa’s largest economy competently, he said.

“Work is being done by technocrats, they are there and they provide the continuity,” he said.

Last week, JPMorgan Chase & Co. excluded Nigeria from its local-currency emerging-market bond indexes, tracked by more than $200 billion of funds, after the central bank’s restrictions prompted investor concerns about a shortage of liquidity.

The naira remained little changed at 199.05 per dollar on the interbank market at 3:05 p.m. in Lagos.

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