Nigeria’s Buhari questions benefit of currency float amid weakened naira
Nigeria’s central bank abandoned the naira’s 16-month old exchange rate peg, of 197 naira to a dollar, a week ago in an effort to alleviate the chronic foreign currency shortages that have choked growth in Africa’s biggest economy.
How much benefit can we derive from this ruthless devaluation of the naira?
The naira ended at 282 to the dollar on Monday but was trading at round 350 on the black market.
“I don’t like the returns I get from the CBN (Central Bank of Nigeria),” said Buhari, addressing a group of business leaders that included Africa’s richest man, Aliko Dangote, Zenith bank founder Jim Ovia and oil billionaire Femi Otedola.
The 73-year-old former military ruler, addressing the group at his official residence in the capital, Abuja, said the devaluation of the naira in 1985 saw the naira trading at 1.3 to the dollar, whereas “now you need 300 or 350 naira to a dollar”.
“How much benefit can we derive from this ruthless devaluation of the naira? I’m not an economist neither a businessman – I fail to appreciate what is the economic explanation,” said Buhari.
In a June 3 letter to Buhari, seen by Reuters, the central bank governor said he hoped the naira would eventually trade at around 250 per dollar, a level the president had “approved”.
Buhari had consistently said he was opposed to the removal of the currency peg but, in an essay published in the Wall Street Journal earlier this month, appeared to back the adoption of a more flexible foreign exchange policy.
The economy in Nigeria, an OPEC member, has been hit hard by the sharp drop in global oil prices since the country’s crude oil sales make up about 90 percent of foreign exchange earnings and 70 percent of government revenues.
Foreign exchange restrictions were imposed by the central bank last year in an attempt to conserve dwindling U.S. dollar reserves.
“What has happen to us now is that we have manoeuvred ourselves into mono-economy which led to the collapse we are seeing now,” said Buhari.