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Naira not devalued - CBN explains

By The Citizen
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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 communiqué 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.'