*** CBN: Naira stronger than dollar in purchasing power
parity Apex bank redeploys directors
Vice President Yemi Osinbajo saturday reaffirmed the
Federal Government position that the country’s currency
would not be devalued in spite of pressures to act
otherwise.
But a former Central Bank of Nigeria (CBN) Governor,
Mr. Joseph Sanusi, warned that delaying the devaluation
was akin to “postponing the evil day.”
The different positions were taken at a town hall
meeting that the Vice President held with his co-
tenants in Victoria Garden City (VGC) on the Lekki-Epe
axis of Lagos, according to a News Agency of Nigeria
(NAN) report.
At the event, Osinbajo re-echoed President Muhammadu
Buhari’s position, insisting that devaluation was not on
the table.
“That is the position of government,” he said.
However, Sanusi, a VGC resident, advised the
government to either devalue the currency or stop the
confusion between the official and parallel market
exchange rates.
Sanusi said allowing an official rate at N197 per dollar
while the parallel market sold for over N300 was
“distractive”.
“Naira is already devalued and government not
accepting it is postponing the evil day,” Sanusi said.
Sanusi, who was governor of the apex bank between
May 29, 1999 and May 29, 2004, is the third former CBN
governor that would speak-out on government’s
economic policy as it affects devaluation and foreign
exchange rate.
Last October, former CBN Governor, now Emir of Kano,
Lamido Sanusi, had called on government to devalue the
naira and warned that Africa’s biggest economy was in
danger of a long-term slump unless government
confronts slowing growth.
“Let’s stop being in denial, we cannot artificially hold up
the currency,” Sanusi had counseled, and noted that
President Buhari “needs help on the economy.”
His predecessor in office, Professor Charles Soludo, in
his appraisal of the state of the economy last November,
had also said the politics of naira devaluation and CBN’s
promotion of fixed exchange rate was not good for the
economy, and warned that “The economy has always
done worse in fixed exchange rate regime. Capital will
fly out. Such policies do more harm than good. Capital
flight in a country that is in dire need of capital is bad.
Private capital is on the run.”
Reiterating government’s position yesterday, Osinbajo
said CBN will operate in line with the speech delivered
by President Buhari after he was elected to come up
with flexible exchange rate to be supported by strong
monetary policies.
He said the foreign exchange policy of government was
to stop unnecessary consumption of imported goods and
promote local manufacturing.
Osinbajo also said government met a falling revenue
profile in May 2015, which was down by about 70 per
cent compared to the same period of the preceding
year.
He also said in spite of the high cost of about $22 to
produce a barrel of crude oil, now selling at about $33
dollars, no fewer than 38 per cent of the foreign reserve
was spent on importing petroleum products.
The Vice President said the previous administration was
spending about N20 billion on food importations
annually, which reduced the nation’s foreign reserve
drastically from about $40 billion to about $25 billion.
As a result, he said, the current administration was bent
on diversifying the economy from crude oil to
agriculture and solid minerals production.
Osinbajo said the focus on agriculture was to make
Nigeria self-sufficient in rice, poultry and palm oil
production as well as develop the entire agriculture
value chain to create wealth and jobs for the teeming
youth.
The vice president further stated that the current
administration targets 2018 for complete reliance on
refined petroleum products, adding that the
petrochemical industry, railway infrastructure and
provision of other infrastructure were atop the priority
of the federal government.
He told the VGC community that the major areas of
focus of the Buhari administration were security,
governance, anti-corruption and economic rejuvenation.
According to him, Boko Haram insurgency had been
degraded as a “military might” although pockets of
suicide bombings still take place.
“This is a challenge we must tackle going forward but
the other challenge is the over 2 million people
displaced by insurgency who need resettlement,” he
added.
He said the idea was to re-settle the people back to
their farming occupation first, but that would be after
the entire North-east land had been de-mined.
He restated that in governance, corruption was a critical
issue because “the whole system, both public and
private, is replete with corruption which has become the
rule rather than the exception.
He recalled the armed purchase scandal “where a huge
amount of money was spent but unfortunately it went
into private pockets.”
He recounted that fake Armoured Personnel Carriers
(APCs) and fake bullet-proof vests were purchased for
soldiers thus endangering the lives of anti-terrorism
combatants. “Unless we seriously fight corruption
through a systematic rebirth of our public system, the
future of the country is in grave danger,” Osinbajo said.
He said the administration had a robust plan to uplift
education standards through the recruitment of 500,000
additional graduate teachers to serve in the rural areas,
development of materials for teacher education and
focus on science, engineering, technology and
mathematics education.
He said Buhari had put together an asset recovery team,
adding that looted assets and funds recovered would be
returned to the federation account.
Osinbajo also announced that all idle mining licences
issued by the past administrations were being mopped
up, while the government was reviewing the contract
signed between the CBN and Systemspec on remittances
made into the Treasury Single Account (TSA).
Meanwhile, despite the volatility in the value of the
naira as measured against the United States dollar, CBN
yesterday said the national currency was stronger than
the greenback as far as the purchasing power parity of
the two currencies is concerned.
The CBN Deputy Governor, Financial System Stability,
Mr. Joseph Nnanna, who spoke with THISDAY, noted
that the position of the local currency in relation to the
dollar might not be as bad as it is currently painted in
some quarters when viewed in the light of the
purchasing power parity, which offers a “true
determination of the value of a currency.”
The purchasing power parity (PPP) compares two
currencies in different countries based on the price of
similar goods.
Nnanna expressed dismay that Nigerians had apparently
taken a position against the naira pointing out that the
current volatility in foreign exchange was largely
induced by speculative activities.
“You would agree that N100 could buy more items than
$1 would buy in America,” he said.
Giving an analogy to buttress his point, he said:”With
N100, you can buy maybe two corns and this is a corn
season, but with $1, you can’t buy a corn in America. So
in that comparison, which is the stronger currency? The
money that can buy two corns or the one that cannot
buy a single corn.
According to him, “We can buy two corns for N100 now
because this is their harvest season and corn is
available. If our people didn’t go to farm to plant corn,
can we have corn to buy? If corn is off season, N100 will
not buy you a corn, it will become more expensive.
“I just brought this illustration to tell you that a
country’s currency is a measurement of the total
productivity of that country. If we don’t produce,
there’s no way our currency can be strong and
unfortunately for Nigeria, we produce what we do not
consume and we consume what we do not produce.”
” That’s why everybody is looking for dollars to import
from abroad and when you do that, importing from
abroad, you are actually exporting jobs and creating
unemployment. So when people are saying the naira
continues to fall, what we are saying is that our
productivity has continued to decline,” he added.
According to him, “at the moment, the exchange rate
you see in the parallel market is due to speculations.
Nigerians are taking position against their own currency
which is unfortunate. If you look at the purchasing
power parity, which is a true determination of the value
of a currency, you would agree that N100 could buy
more items than $1 would buy in America.”
On the high rate of the dollar at the parallel market due
to shortage at the official window, the CBN deputy
governor said:”Yes, it is a good issue but the dollar is
scarce, we don’t use dollar in Nigeria, we use the naira-
Is naira scarce? Naira is not scarce; the reason why they
are looking for the dollar is because they want to
import, they are importing the things we don’t have;
but those things they are importing are the things we
can produce.
“I go back to my first analysis that a currency is as
strong as the GDP of that country; so if we can produce
locally, we don’t need the dollar but because we are not
producing, that’s why people need the dollar to
import.”
Asked if they would not be forced to consider a
devaluation of the current and review its policy on the
41 items banned from accessing forex from the official
window, Nnanna said:”We do not see any need to
devalue the naira as of now.”
He added:”If the time to devalue the naira comes, we
would do so but for now, there’s no reason for that. At
the so-called parallel market or black market, where
they are selling a dollar at N375, how many people are
patronising the market? Are they smugglers? Are they
people, who want to take away money from the
country? If you make your money in a genuine way, will
you truly spend N375 for $1?”
Continuing, he said:”We didn’t ban any item; This CBN
you see here has no power under the constitution or the
laws of central bank to ban any item. All what we said is
simple: we don’t have dollars, so these items like
toothpick, textiles, eggs that we can produce in Nigeria-
we don’t have dollars to give to you to import them.
According to him, “If you want to use toothpick…If you
want to eat egg, go to the poultry and buy egg, our egg
is also good, if you want to eat rice, please go to
Nasarawa State, go to Ebonyi State, go to Kebbi State,
they have rice. That’s what we are saying but if you
have your own dollar and you want to bring those
goods, we clap for you and say go and bring them but
with your own dollar.”
Meanwhile, the naira appreciated to N320 against the
dollar at the parallel market last Friday, higher than the
N330 to a dollar it recorded the previous day. However,
a shakeup has occurred at the CBN with the portfolios
of some directors reshuffled.
According to sources within the CBN, Mr. Edward
Adamu, has taken charge as the new Director of Human
Resources while Olasukanmi Gbadamosi is now Director,
Legal Department. Besides, Dr. Alvan Ikoku has emerged
the new Director, the Trade & Exchange Department
(TED). Chizoba Mojekwu is now in charge of the
Capacity Development Department, which takes care of
the International Training Institute (ITI) Learning
Centre.
Also affected in the redeployment exercise was Director
of Corporate Communications, Ibrahim Muazu, who has
now been posted to the Strategy Management
Department (SMD).
THISDAY however gathered at the apex bank saturday
that though the development could not be refuted,
there had not been any official statement on the
deployment.
Muazu, in a telephone interview, said a formal
communication would be made next week to provide a
clear picture. No replacement had however, been
announced for a new spokesperson for the apex bank.
This Day
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