Nigerian Central Bank Policy Maker Calls for Devaluation

  • Salami argued for naira to be weakened by 10% in January
  • Naira has been pegged at 197 to 199 per dollar in past year

Nigerian central bank policy maker Doyin Salami argued again that currency restrictions are hurting the economy and fueling inflation, proposing that the naira should be devalued by 10 percent.

Salami, an academic who lectures at the Lagos Business School, voted at the January meeting to weaken the midpoint of the currency band to 220 per dollar from 197, according to personal statements of members of the Monetary Policy Committee published on the central bank’s website. He also proposed widening the exchange-rate band to 5 percent around the midpoint.

With the backing of President Muhammadu Buhari, the Central Bank of Nigeria under Governor Godwin Emefiele has rejected calls to devalue the naira despite a plunge in oil prices that’s slashed revenue in Africa’s biggest crude producer. The bank has instead effectively banned imports of some goods and restricted foreign-currency supply, pegging the naira at 197 to 199 per dollar in the past year.

That hasn’t stopped the black-market rate from soaring to about 320 against the dollar, adding to costs in the economy as businesses turn to the parallel market to access foreign currency. Inflation, which was unchanged at 9.6 percent in January, has been above the central bank’s target band of 6 percent to 9 percent since June.

Lone Voice

“The central bank’s concentration on exchange-rate stability seems to have led to abandonment of its price stability/inflation objective,” Salami said. “We are, unnecessarily, paying –- in the form of eroding confidence, slowing growth and increasing joblessness of our population –- a needlessly heavy price.”

Salami is a lone voice among 12 MPC members seeking a devaluation. In August, he said the currency restrictions would slow economic growth and have confused foreign investors. Gross domestic product rose 2.8 percent last year, the slowest pace since 1999, the statistics office said on Wednesday.

“The majority of the committee is expected to toe the line of the president,” Ayodeji Ebo, head of research at Afrinvest West Africa Ltd., said by phone from Lagos. “His persistent statements against devaluation will influence the MPC’s decision because of the way the committee is nominated.”

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