The Nigerian President, Muhammadu Buhari, in an information he relayed in an interactive meeting he had with Nigerians living in Kenya, has once again refused suggestions for Naira devaluation noting that he is not yet convinced enough to believe that taking the step will make a positive impact in the lives of the Nigerian citizens. This information was attributed to the President in a statement made by Malam Garba Shehu, the Senior Special Assistant to the President on Media and Publicity, in Abuja, on Thursday.
President Buhari insists that export-driven economies could benefit from devaluation of their currencies, but doing the same in a country like Nigeria whose economy is import-dependent, will only result in further inflation and hardship for the poor and middle class.
Bringing further hardship on the country’s poor, he said, was something he had no intention of doing, noting that they had suffered enough already.
Buhari likened further devaluation of the Naira to having it “killed,” and said the people advocating for devaluation has a lot of work to do in order to persuade him to believe that it will be of benefit to the ordinary Nigerians.
The Nigerian president also refused propositions that the Central Bank of Nigeria (CBN) should recommence the sale of foreign exchange to Bureaux de Change (BDCs), saying that the BDC’s business had become a scam and a drain on the economy.
We had just 74 of the bureaux in 2005, now they have grown to about 2,800.
He said without proof, that some banks and officials of the government used surrogates to run the BDCs and excel at the expense of the public by procuring foreign exchange from government at official rates and selling it at much higher rates.
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We will use our foreign exchange for industry, spare parts and the development of needed infrastructure.
We don’t have the Dollars to give to the BDCs. Let them go and get it from wherever they can, other than the Central Bank.
The President confirmed again the validity of his conviction that about a third of petroleum subsidy payments under the immediate past government was not genuine. As he said,
They just stamped papers and collected our foreign exchange.
Buhari pleaded with Nigerian students abroad to bear with his administration as it makes effort to tackle the difficulties they were facing as a result of the new foreign exchange measures.
He expressed confidence that the economy of Nigeria would soon be stable with the effective execution of measures and policies that had been introduced by his administration.
Contrary to the president’s opinion, some economists and financial analysts have found fault with Buhari’s stand on the Naira devaluation, emphasizing that it will be difficult for the CBN to shield the currency from further devaluation in the midst of exhausting external reserves.
Among these people are the two former Governors of CBN, Mallam Lamido Sanusi and Prof. Chukwuma Soludo. Sanusi gave reasons for his position stating that Nigeria needed to devalue the Naira because the CBN might not be able to sustain its current forex control polices on the long run, especially in the face of the depleting forex earnings by the nation while Prof. Soludo made it clear that history has proven that forex restrictions had not worked in many countries in times past.
Again, Mr. Johnson Chukwu, the Chief Executive Officer of Cowry Asset Management Limited, said,
This position is not sustainable; the CBN will find it difficult to keep and preserve the naira in the face of falling forex income to the nation.
We cannot continue like this as a country. Already, the CBN is no longer able to provide forex for basic raw materials and production inputs; this may lead to further factory closures. It is in our best interest to devalue now.
Opposed to Buhari’s idea of Naira devaluation being bad for an import-dependent economy, Mr. Chukwu said,
Actually, Naira devaluation is good for the economy; it will not hurt an import-dependent economy like ours the way some people have perceived it. When we devalue the Naira, it will make some imported goods to be so expensive that some local substitutes will begin to spring up; this will help to stimulate domestic production.
Again, when we devalue, it makes our exports as a country to be cheaper such that they will become more competitive in the international market.