CBN breaks silence as regards report of plan to devalue Naira

Nigeria ‘s central bank denied a report that it
planned to devalue the naira, while the
International Monetary Fund (IMF) reiterated
that Nigeria would benefit from a more
flexible exchange rate but said no request
for funds had been made.
Talk of a devaluation has been rife since
Vice President Yemi Osinbajo said on
Wednesday the central bank needed to
change its foreign currency policies to spur
investment.
Hours earlier, Nigeria had cut petrol
subsidies, lifting pump prices by up to 67
percent, a move the IMF usually insists on
before releasing funding.
News website SaharaReporters.com said
President Muhammad Buhari had agreed to
devalue the naira in exchange for IMF
funds to help offset a slump in oil revenues.
Quoting unnamed Buhari aides, the report
said the naira rate to the dollar could fall
to 290 from roughly 200.
“ The rumour that the naira is going to be devalued
is false ,” central bank spokesman, Isaac
Okoroafor , said late on Saturday when asked
about the report.
An IMF spokesperson said Nigeria had not
approached the fund for funds but
reiterated that a more flexible exchange
rate would support “ the competitiveness of the
economy “.
“ And so, there are no negotiations going on,”
the spokesperson said. “ However, as we have
said before, the Fund continues to have a
productive dialogue with the authorities and we
stand ready to help should the country make a
request.”
Nigeria has held talks with China, the World
Bank and African Development Bank for loans
to help fund its record $30 billion budget
for 2016 but Finance Minister Kemi Adeosun
said in January the oil producer was not
seeking any emergency loans.
Buhari has resisted calls by the IMF for a
devaluation.
But British Foreign Minister Philip Hammond
said Nigeria had de-facto partially
devalued the naira by allowing fuel
importers to buy dollars on the black market
last week. The naira trades at about 40
percent below the official rate on the black
market.
“ The exchange rate applicable to oil imports
effectively recognises that there is an imbalance in
the official rate,” he said.
“ Maybe they’ll take the logic of how this goes and
move further ,” Hammond told reporters before
meeting Buhari in Abuja late on Saturday,
without elaborating.
On Wednesday, Osinbajo said Nigeria needed
a “substantial” review of its exchange
policies and would see very soon a more
flexible approach. Asked whether the naira
should be devalued, he said that “ there is an
ongoing debate “.
The central bank has imposed hard currency
curbs and frozen the naira rate to the
dollar, which has hit investment as foreign
firms expect Nigeria to devalue the currency
anyway at some point due to a slump in oil
revenues.
“ Exchange restrictions are costly and distortionary;
at best, they could be temporary, but should be
removed ,” the IMF spokesperson said in an
emailed in response to questions.