PRESIDENT Muhammadu Buhari said, Wednesday, in
Paris, France, that he opposed a further
weakening of the naira and openly endorsed the
Central Bank of Nigeria, CBN’s policy of
restricting foreign-exchange trading.
The President, who was answering questions in an
interview with France 24 broadcast, said: “I do
not think it is healthy for us to get the naira
devalued. The Central Bank is providing ample
foreign exchange to essential services, industries.”
CBN has been under pressure from foreign
investors to further devalue the naira. Nigeria
had, last year, devalued the naira to N197 to the
dollar from N160. The naira was further adjusted
slightly in July to N199 to the dollar. As a
result of the continued pressure on the naira,
CBN introduced some measures to curb the excess
demand for foreign exchange.
This, however, did not go down well with some
of the foreign investors. After the crash of oil
prices last year, the CBN Governor, Mr. Godwin
Emefiele, reacted to the naira’s drop to a record
low in February by extending trading curbs and
introducing bans on purchases of dollars by 41
items, which CBN said cannot access foreign
exchange from the Nigeria market.
CBN, JPMorgan clash
The naira has since stabilized at the inter-bank
market, but foreign investors, local businesses and
even some members of CBN Monetary Policy
Committee have complained that the naira is
overvalued.
Reacting to these measures put in place by the
CBN, JPMorgan excluded Nigeria bonds from its
bond index.
Reacting to JPMorgan’s decision, CBN’s Debt
Management Office and the Ministry of Finance, in
a joint statement, said: “It will be recalled that
Nigeria was included in the index in October
2012, based on the existence of an active
domestic market for FGN Bonds supported by a
Two-Way Quote System, dedicated market makers
and diverse investors.
“However, in January 2015, JP Morgan placed
Nigeria on an Index Watch as a result of their
concerns in the operations of our Foreign
Exchange, FX, market, namely lack of liquidity for
transactions, lack of transparency in the
determination of the exchange rate and lack of a
fully functional two-way FX market.
“In our continuous bid to strengthen the Nigerian
financial market and enhance our status as a
preferred destination for investors, we took
measures to improve the market.
Despite the fact that oil prices have fallen by
nearly 60 percent in one year, which should
expectedly reduce the amount of liquidity in the
market, CBN ensured that all genuine and effective
demands were met, especially those from foreign
investors.
“On transparency, CBN mandated that all FX
transactions were posted online in the Reuters
Trading Platform so that all stakeholders can
easily verify all transactions in the market.
In addition, the official FX window at CBN were
closed to ensure a level-playing field in the
pricing of foreign exchange. It is important to
note that a functional two-way FX market already
exists in Nigeria.
CBN justifies regulation
“However, given the high propensity for
speculation, round tripping, and rent-seeking in
the market, it became imperative that participants
are not allowed to simply trade currencies, but
are only in the market to fulfill genuine customer
demands to pay for eligible imports and other
transactions.
“In the light of this, we introduced an order-
based, two-way FX market, which has resulted in
the stability of the exchange rate in the interbank
market over the past seven months and largely
eliminated speculators from the market.
“Despite these positive outcomes, JPMorgan would
prefer that we remove this rule, even though it
is obvious that doing so would lead to an
indeterminate depreciation of the naira. With
dwindling oil prices, we believe that an order-
based two-way market best serves Nigeria’s
interest at the moment.
“While we would continue to ensure that there is
liquidity and transparency in the market, we
would like to note that the market for FGN
Bonds remains strong and active due, primarily, to
the strength and diversity of the domestic
investor base.
“For the avoidance of doubt, the Federal
Government sees Nigeria and the interest of
Nigerians as paramount. It will, therefore, only
continue to take economic decisions that will
impact positively in the lives of all Nigerians.”
President Buhari also said in the interview that
markets were not being harmed by the delay in
ministerial appointments, which he says will
happen by the end of the month.
He said: “Work is being done by technocrats;
they are there and they provide the continuity.”
The naira remained little changed at 199.05 per
dollar on the inter-bank market at in Lagos.
http://www.vanguardngr.com/2015/09/i-wont-devalue-naira-says-buhari/

Its N1 or nothing!