President Muhammadu Buhari said on Friday he is yet to be convinced that Nigeria would benefit from a devaluation of the naira, despite its sharp fall against the dollar on the black market and rising inflation.
The slump in global crude prices has caused the worst economic crisis in years in Nigeria, Africa’s top oil exporter, as oil sales account for about 70 percent of national income.
The official exchange rate against the dollar was pegged at 197 in February last year but a foreign exchange shortage has seen the naira hit record lows on the parallel market in the last few months. It traded at 320 on the black market on Friday.
Last year the central bank introduced curbs to protect foreign exchange reserves, which have fallen to 11-year lows. Companies have complained that they cannot get hard currency to fund essential imports such as food or machinery spare parts.
The central bank has resisted calls from the International Monetary Fund (IMF) and investors to ease the restrictions — a stance supported by Buhari, who has previously likened a devaluation of the naira to having it ‘killed’.
Buhari, a 73-year-old former military ruler who led the country for 20 months in the 1980s, said he resisted pressure from the IMF and World Bank to devalue the naira in his previous tenure and was still yet to see the benefits it would bring.
“The naira remained strong against the dollar and other foreign currencies until I was removed from office in August 1985 and it was devalued,” the president said in an address to retired civil servants.
“But how many factories were built and how many jobs were created by the devaluation? That is why I’m still asking to be convinced today on the benefits of devaluation,” he said.
Inflation rose to a near four year high of 12.8 percent in March, up from 11.4 percent the previous month, which was driven by a rise in food prices.
Foreign stock and bond market investors have become reluctant to put money into Nigeria because they assume the naira will eventually have to be devalued.
A Reuters poll last week predicted that the dollar shortage would prompt a devaluation by September.
