Following the recent hike in fuel price and petrol subsidy removal by the government, facts have emerged pointing to the possibility of the government to devalue Naira.
Minister of State for Petroleum Resources, Dr. Ibe kachikwu, had earlier revealed in his official statement announcing the new price regime that the new pricing was based on prevailing Forex market valuations and ability of importers to source dollars to import products.
The Vice President, Professor Yemi Osinbajo, had said on Wednesday that Nigeria is set to “substantially re-evaluate” its foreign exchange policy, adding that a “more flexible approach” to the currency should be expected “soon.”
The more flexible option, according to analysts, would mean a tacit devaluation of the Naira, which currently exchanges for N197 to the dollar at the official Central Bank rate, against N320 to the dollar at the parallel market.
President Buhari has consistently averred that he opposes devaluation of the nation’s currency, despite pressures from within and outside the country.
The vice president’s statement is coming on the heels of recent hike in petrol prices in the country, under a new deregulated regime, despite the known stance of Buhari to the contrary.
Osinbajo, at an investors’ forum hosted by Renaissance Capital in Lagos on Wednesday, explained that the more flexible foreign exchange policy would “be able to attract more capital into the system and ease business.”
Foremost Economist and Chief Executive of Financial Derivatives Company, Mr. Bismarck Rewane applauded the government’s moves towards full deregulation of the downstream sector, insisting that this should be followed with devaluation of the embattled currency.
“We must follow this with Naira adjustment to say around N230 to the USD and if this happens, we will begin to see the parallel market rates drop to around N255 as we inch towards equilibrium. So what will be required will be a minimal Naira adjustment. A very good start.”
Some analysts however are of the opinion that Osinbajo’s revelation is a welcome one, since President Buhari had refused to devalue, despite public outcry for it in the past few months.