Naira not devalued - CBN explains
The Central Bank of Nigeria (CBN) Deputy Governor designate, Dr. Joseph Nnanna, yesterday explained that the apex bank had not devalued the naira as widely reported in the media in Abuja.
Nnanna said the CBN merely announced a new exchange rate in compliance with market forces.
He stated this when he appeared before the Senate Committee on Banking, Finance and other Financial Institutions. 'The central bank did not devalue the naira so to speak; it only followed the three principal markets in Nigeria - the official, the retail and the parallel.'
He also explained that the CBN will not pursue the policy permanently, adding that it will elapse with the current positive transformation in the agricultural sector, which would make it possible for products to be exported to bring more foreign exchange to the country.
'We better do it now than later when we will have import control, which would bring about essential commodity crisis. Nigerians should be patient. Unfortunately, Nigerians are always in a hurry. Let us give the central bank time to pursue a policy that will be a blessing to all of us. I commend the CBN for being proactive with the policy.'
Nnanna said another way to wriggle out of the economic crisis would be to recapitalise development banks with a view to encouraging them to lend at controlled interest rates.
He said, 'my take is that since we have development banks like the Bank of Industry (BoI), Nexim Bank, Bank of Agriculture, and so on, we can recapitalise all of them and mandate them to lend at a fixed interest rate to entrepreneurs and other investors willing to invest in the Nigerian economy.
If we recapitalise the BoI and we tell the Managing Director to lend at a specific interest rate, he will oblige us because it is the taxpayers money.
'We cannot force the management of a private commercial bank to lend at a fixed rate because they will take into consideration the risk premium, especially when most people borrow without the intention of repayment.
Meanwhile, the International Monetary Fund (IMF) yesterday gave its support to the action taken by the Central Bank of Nigeria. Mr. Gene Leon, IMF Mission Chief for Nigeria, in a statement yesterday, said, 'We are supportive of and welcome these actions, which we view as complementary and moving in the right direction. Of course, the global situation remains fluid and the key issue is being ready to manage downside risks and for the authorities to be prepared, based on assessments of credible scenarios, to consider additional measures, as necessary.'
The statement further added, 'In a combination of actions, most recently the communiquÃ© after the Central Bank of Nigeria's Monetary Policy Committee meeting of November 24-25, the authorities have announced a set of policies aimed at mitigating the impact of the recent significant fall in global oil prices on the economy. These include: adjusting the exchange rate, resubmitting the Medium Term Expenditure Framework to the National Assembly with proposed tax and expenditure measures to achieve the deficit target consistent with a lower budget oil price and tightening monetary policy as necessary.'