Nigerian central bank governor Godwin Emefiele said on Tuesday he would not allow the naira to float freely because it would lead to “major” depreciation of the currency.
A weaker currency would affect the purchasing power and economy of Africa’s most populous nation, he told a business conference in Lagos.
The naira has been under pressure from a fall in the price of oil, Nigeria’s main export. This forced the central bank to devalue the currency by 8 percent in November to save its foreign reserves, after several months of defending it.
The naira closed at 192.10, a new record low against the U.S. dollar on Tuesday, compared with Monday’s record low close of 191.10. The currency has been hitting new record lows since this year.
“We cannot allow price (of the dollar) to just sky rocket simply in the name of demand and supply, that’s why what we do … is run a managed float where there’s a particular limit (at which) we intervene to keep price of foreign exchange within a moderated level,” Emefiele said.
Emefiele said the central bank will continue to see how best to moderate naira pressures, noting that Nigeria imports almost everything it consumes — even “toothpicks, fish and rice” — which ruled out allowing the naira to float.
“If we do … it will lead to major depreciation of the currency. It will lead to high prices … the purchasing power of our people will decline … (and it) will begin to hurt the economy.”
The governor told the conference that the central bank had intensified its vigilance in the forex market in order to curb speculation and also to determine when to intervene.
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