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BUSINESS & ECONOMY

Buhari’s Support Fortifies CBN Resolve on Naira as MPC Meets Next Week

Nigerian Economy Records US$10.22 billion Foreign

President Muhammadu Buhari stoic stance against calls for the devaluation of the naira has strengthened the resolve of central bank Governor Godwin Emefiele  not to devalue the currency as the Monetary Policy Committee of the apex financial institution meets on Monday and Tuesday next week to take a decision.

In his first public comments on the currency since taking office in May, Buhari, 72, said on Wednesday he opposes a weakening of the currency, a move that endorses Emefiele’s policy of restricting foreign-exchange trading to stabilize the naira despite a plunge in oil revenue in Africa’s biggest crude producer.

“There appears to be some unwritten agreement between the presidency and the central bank that the naira will not be devalued, in spite of the deteriorating fundamentals,” Alan Cameron, an economist at Exotix Partners LLP in London, said in an interview with Bloomberg. “Neither the presidency nor the central bank governor appear willing to acknowledge the trade-off between a fixed naira and an economy that’s functional,” he said.

Nigeria’s central bank introduced rules to limit dealing and prevent dollars fleeing the country as crude prices plunged by more than half since the beginning of June 2014 to below $50 a barrel. Emefiele, 54, refused to devalue the naira even as central banks from Angola to China and Kazakhstan devalued exchange rates and oil producers such as Russia and Colombia allowed their currencies to depreciate.During an official visit to Paris this week, Buhari told France24 that it wouldn’t be “healthy for us to get the naira devalued” and that the central bank was providing enough foreign exchange for “essential services.”

Investors have disagreed with Buhari and Emefiele. JPMorgan Chase & Co. last week cut Nigeria from its local-currency emerging-market bond indexes, tracked by more than $200 billion of funds, as concern mounts that the restrictions will dry up liquidity and make it difficult for international investors to sell naira bonds and stocks.

However, Emefiele’s action has contributed to naira remaining stable at an average of 198.93 against the dollar at the inter-bank market  since March. Thant is despite the fact that forward prices suggest it will fall 13 percent to 227.5 in six months and 21 percent to 253 in a year.

Source: Bloomberg

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