ABUJA, JUNE 1, 2018 – The Central Bank of Nigeria, CBN, has disclosed that the naira would continue to exchange at N360 to a dollar until production and export of goods increases significantly in the country.
Speaking in Abuja, Wednesday night, at the monthly meeting of the Nigerian Institute of Public Relations, NIPR, Capital City Chapter, Abuja, Acting Director in charge of Corporate Communications at the CBN, Mr. Isaac Okoroafor, also stated that if it had given in to pressures put on it to float the naira, the country’s currency would have depreciated to N3,000 to the dollar.
Okoroafor noted that the dollar cannot be said to be over-valued against the naira, because currency valuation is not determined in isolation, but is also hinged on the strength and the ability of the country to produce and export.
Why multiple exchange rate
He explained that the CBN’s decision to maintain multiple exchange rates and allowed the naira to trade around N360 to a dollar was based on the fact that it is trying to help manage the economy until real production begins.
He said, “You need to stimulate people through this kind of arrangement. Once we feel things are stable, we can allow a unified exchange rate. We understand what we are doing because the development of Nigeria is at the root of everything. We try to ensure that we do not increase the level of misery and we try to encourage people to try and produce with the little they have.”
The CBN spokesman added that as soon as the Nigerian economy improves, especially with positive signals seen in the 2018 budget, the value of the naira would increase and the currency would drop below N360 to a dollar.
“We believe that with time, once the level of infrastructure improves and there is better security, prices would begin to come down and as prices come down, production would start and Nigerians would begin to export. This is because your ability to export also determines the strength of your currency.
“Nigerians should go and produce, add value to the goods and export. And once we start that, we see the naira shaping up. The naira would begin to strengthen. As long as we remain a nation of consumers, taking from other countries, and even killing those who are producing it here, our naira would continue to be weak.”
Floating would dragged naira to N3,000 to $1
In addition, Okoroafor explained that it was pressured both locally and internationally, to float the naira, but it resisted it because it felt it was a wrong option and would be dangerous to the economy.
He said, “We believed that floating the naira could have destroyed this economy, because from our own calculations, if we had floated the naira when it was N525, the next thing would have been N700, N1,200, maybe N3,000 and it goes; it would begin to go haywire.
“We resisted that because we knew what we were doing. We resisted this because we knew we were right and they were wrong and we were proved right.”
Okoroafor added that, “Egypt floated its currency and inflation rate moved from 14 to 31. Of course, the inflation rate in Venezuela that floated its currency also was 95 per cent. In Zimbabwe, I don’t know how many thousand was the last one.
“You could see that we weaved the story around saying ‘look, telling us to float the naira is like taking off from Egypt to Venezuela to take a connecting flight that would land you in Zimbabwe.”
We warned of impending recession
On the CBN monetary policy stance in the face of dwindling economic fortunes, Okoroafor averred that the CBN, through one of its Monetary Policy Committee communiqué, specifically in July 2015, had warned that the Nigerian economy would go into recession if nothing urgent is done and if demand is not stimulated
He said, “The role of the central bank is to maintain stability; that is all. Now, that is the nature of the central bank, but the people that could respond to such things are the fiscal side. We were ready, but monetary policies do not have the tools to increase production, reduce cost and supply more food.”
Banks attempted to scuttle interventions
Okoroafor also disclosed that the CBN deployed a number of strategies, including constant communication, engagement, with banks and other stakeholders and threat of sanctions, to salvage the naira, despite attempts by commercial banks in the country to derail its programmes.
The CBN spokesman noted that the measures helped Nigeria set a record as the only country in the world that was able to strengthen its currency from a very weak position of 525 to 360 to the dollar.
