- Official rate should be 5% below black market, UBA CEO says
- Nigeria needs to ecourage inflows of dollars, banker says
Nigeria’s currency should be trading within 5 percent of black market rates to help stabilize Africa’s biggest economy which has been hurt by oil’s depreciation, according to the chief executive officer of United Bank for Africa Plc.
With black market rates at 300 naira to $1 and the official rate for the currency at 198.50 naira for a dollar, UBA’s Phillips Oduoza said a better level for the official rate would be 5 percent below that, or 285 naira per greenback. Policies should also be implemented to increase local production and cut reliance on imports, encouraging inflows of foreign-exchange, he said.
“We need to deal with the economic problems of Nigeria immediately otherwise it will get to a crisis situation,” Oduoza said Thursday in an interview at the World Economic Forum in Davos, Switzerland. UBA is Nigeria’s third largest lender by assets and operates in almost 20 African nations. “It will spill over to unemployment, security and crime. We need to deal with that as a matter of urgency.”
Nigeria has fixed the naira at 197-199 per dollar since March last year even as crude prices have plunged to a 12-year low of under $30 a barrel and other major producers from Russia to Mexico have let their currencies slide. Foreign-exchange trading curbs implemented by the central bank to bolster the peg have created a shortage of dollars in a country that imports most manufactured goods and hurt growth, which probably fell to 3.2 percent last year, the slowest pace since 1999, according to a Bloomberg survey of economists.
Nigeria derives almost all export earnings from oil, which Oduoza said could yet fall as low as $20 a barrel. The country, Africa’s largest economy and biggest oil producer, should build refining capacity to reduce the need to export crude for processing into fuel, which it then imports, he said.