The Central Bank of Nigeria, CBN, has disclosed that its decision not to undertake a further devaluation of the naira was borne out of the need to safeguard the Nigerian economy from the shocks and negative impact the depreciation will have on the economy.
The CBN in a statement signed by its Director, Corporate Communications, Ibrahim Mu’azu, in reaction to an article published by The Economist Magazine, maintained that the CBN does not panic and will not take desperate measures to satisfy few misguided interests in the market.
According to Mu’azu, the article seems to ignore the fact that the exchange rate is simply a price that is essentially determined by the forces of supply and demand, adding that the CBN believes that the 48 percent decline in oil prices may not be transitory and made bold policy changes including closure of the subsidized Official Foreign Exchange (Forex) Window, which resulted in a 22 percent depreciation in the currency, the Naira.
He said, “Because the Nigerian economy is heavily dependent on imports and the exchange rate pass-through to inflation is high, we believe that this adjustment is optimal at this time.
“Contrary to the article’s argument, adjustments to a sharp decline in supply of US Dollars cannot all be borne by an indeterminate depreciation, without considering the full impact on the Nigerian economy.
“The demand side also has to be considered, not just in response to the pressure on the Naira but as an opportunity to change the economy’s structure, resuscitate local manufacturing, and expand job creation for our citizens.
“Take rice imports, for example: why should we keep allocating scarce forex to rice importers when vast amounts of paddy rice of comparable quality produced by poor hardworking local farmers across the rice belts of Nigeria are wasted, and farmers are falling deeper into poverty while we export their jobs and income to rice producing countries?
“Few decades ago, Nigeria was one of the world’s largest producers of palm oil but today we import nearly 600,000 Metric Tonnes while Indonesia and Malaysia combine to export over 90 percent of global demand.”
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