Pressure Mounts on Nigeria Central Bank Governor Over Naira

  • Emefiele summoned to Senate to explain black-market rate
  • Speculation rising that central bank will devalue naira

Pressure is mounting on Nigerian central bank Governor Godwin Emefiele over his currency policies, with lawmakers summoning him to Parliament to explain a slide in the naira on the black market and the main opposition party calling on him to quit.

Nigeria’s Senate asked Emefiele to appear at a hearing in Abuja, the capital, at 11 a.m. on Jan. 19, Majority Leader Ali Ndume said on Thursday.

Godwin Emefiele
Godwin Emefiele
Photographer: Philip Ojisua/AFP via Getty Images

The governor has resisted devaluing the naira despite a rout in oil prices that’s slashed revenue in Africa’s biggest crude producer. With the backing of President Muhammadu Buhari, the governor has instead restricted supply of foreign currency, curbing output in the continent’s biggest economy and all but pegging the naira at 197-199 per dollar since March last year.

The shortage of dollars has led to the naira weakening in the past several months on the parallel market used by companies that aren’t banks. The black market rate fell to 300 against the dollar for the first time this week and was at a record 305 on Thursday.

Since Nigeria “depends so much on imported materials and even food, there is a need for this Senate to, as a matter of urgency, invite or summon the governor of the Central Bank of Nigeria to explain this situation and to provide the necessary solution,” Ndume said.

Emefiele will attend the hearing, Sarah Alade, a deputy governor at the central bank, said in an interview on Friday in Ghana’s capital, Accra. Devaluing the naira “is a decision the Nigerian monetary policy authorities will have to take,” she said.

‘Flip-Flopping’

The summons to Parliament is aimed at putting pressure on Emefiele over his policies, said Olusegun Sotola, head of research at the Initiative for Public Policy Analysis, based in the commercial capital, Lagos.

“The politicians are worried, as are other Nigerians, not only about the falling naira, but also about flip-flopping by the CBN governor,” he said by phone on Friday. “The governor has not shown that he has a full grasp and understanding of the implications of his policies.”

Ibrahim Mu’azu, a spokesman for the Abuja-based central bank, didn’t answer three calls to his mobile phone on Friday or immediately respond to a text message requesting comment.

The opposition People’s Democratic Party said on Thursday that Emefiele should resign “for plunging the country’s currency policy into chaos, an action that has thrown investors into total confusion.” The party also wants Buhari to be impeached and Finance Minister Kemi Adeosun to quit.

Buhari and his All Progressives Congress took office at the end of May after winning a decisive election victory that ended 16 years of PDP rule.

Under former President Goodluck Jonathan, the naira plunged to a record low in February last year following the drop in oil prices, before the central bank stepped in to restrict foreign-exchange trading.

The impeachment call by the opposition is “wishful thinking,” Sotola said. “There’s nothing that will come of it.”

Speculation is mounting that the central bank will devalue the currency, with the move possibly being announced at the end of the Monetary Policy Committee meeting on Jan. 26, Alan Cameron, a London-based economist at Exotix Partners LLP, said in a research note. Three-month non-deliverable naira forwards weakened 4.3 percent to a record 251 per dollar on Jan. 12, before paring losses.

“Political support is swaying in favor of greater exchange-rate flexibility,” Chernay Johnson, a Johannesburg-based analyst at Credit Suisse Group AG, said in an emailed note to clients on Friday. “The de facto peg has become increasingly unsustainable.”

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