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Tuesday, 6 October 2015
If we devalue naira again, we will kill Nigerians, says CBN governor
The Central Bank governor, Mr Godwin Emefiele
The Central Bank governor, Mr Godwin Emefiele, has defended his decision not to further devalue the naira despite the pressure on the currency of Africa’s top oil producer amid the global price crash.
Godwin Emefiele is also under pressure from foreign investors and Nigerian manufacturers, who say his policies are worsening the oil-dependent country’s economic woes.
But the governor, on Monday, maintained that the naira was 'appropriately priced,' telling the Financial Times Africa Summit he would not allow a policy of 'interminable adjustment' as this would only cause more pain for Nigeria’s 170 million people.
The naira lost more than 20 per cent of its value between the start of the oil price fall in July 2014 and February, the last time the Central Bank allowed the currency to depreciate.
Since then, Emefiele has introduced a range of currency controls — doing everything but adjusting the currency to defend its value. The result has been an effective freezing of the country’s foreign exchange market. The lack of liquidity — the ability to move hard currency in and out of the country — was one reason JP Morgan removed Nigeria from its influential emerging markets bond index last month.
President Muhammadu Buhari, who was inaugurated in May, has not yet appointed a cabinet or defined an economic policy to guide the country through the crisis sparked by the oil price crash.
This has frustrated investors who strongly disagree with the monetary policies enacted by Emefiele and argue that in the absence of a fiscal policy, the central bank governor is straying beyond his mandate and intervening in manufacturing policy.
The governor’s comments on Monday about Nigeria’s dependence on imports suggest he believes his policies will stimulate local production. For exmple, the central bank in June banned importers from sourcing foreign exchange for 41 key goods that he said can and should be produced locally.
But Nigerian and foreign companies working in the country say they have had to lay off workers since the controls were introduced because they cannot buy imports needed to run factories.
“There’s no economy that does not protect its own, “ Mr Emefiele said, referring to the June move. “We didn’t protect our own (in the past) and we are now a net importer of palm oil.” Nigeria was the world’s largest producer of the commodity in the 1950s and 1960s.
Speaking at a panel on managing the commodities cycle, he added: “Liberalising can work in one economy and not in another.” Referring to the import controls, he added: “For Nigerians, (this action) is proper.”
Further devaluing the naira would hurt Nigerians, he said, adding: “As long as you have an economy that is import dependent, you do not want to pass on the pain to the people, you will kill your people.”