#FOR THOSE WHO CARE FOR NIGERIAS FUTURE...

The persistent weakness of the naira, occasioned by low oil price in
the international market, calls for devaluation of the currency
sooner than later, industry experts have said, urging the Central
Bank of Nigeria to review its restrictive foreign exchange polices.
The price of crude oil, the nation’s biggest source of foreign
exchange, dropped below $35 per barrel last week, the lowest
level since July 2004.

The naira took a further beating at the parallel market, trading
near its lowest of N280 against the dollar on Thursday. It had
on December 17, 2015 crashed to 280 against the greenback on
the unofficial market.

Declining oil prices and the unwillingness of the CBN to devalue
the naira amid constrained external reserves had continued to
worsen the foreign exchange liquidity position of Nigerian banks,
Renaissance Capital, a London-based investment bank, said in a
report last month.

The naira had been devalued twice since the drop in global oil
prices began, first in November 2014, when the central bank
lowered the midpoint of the official peg by eight per cent to 168
per dollar.

In February 2015, the CBN also scrapped its twice-weekly auctions
at which the naira was sold at a subsidised rate, a move that
resulted in an effective weakening in the exchange rate of the
currency by about 15 per cent.

The currency had lost 28 per cent of its value in the six months
to February 2015 before the central bank fixed the exchange rate
at N198 per dollar and tightened capital controls.
Since then, the central bank has sought to prop up the ailing naira
with several measures, including stopping importers of around 40
items from toothpicks to glass and wheelbarrows from buying
foreign exchange; restricting the use of local debit cards overseas;
lowering Automatic Teller Machine withdrawal limits; and barring
Nigerians from depositing hard currencies into their domiciliary
accounts.

The Managing Director and Chief Executive Officer, Economic
Associates, Dr. Ayo Teriba, said the restrictions the CBN had
recently put in place in the wake of the shortage of foreign
exchange had been counter-productive.
He said, “The way forward to a sustainable exchange rate is to
attract foreign investment. There is no country that can sustain a
stable exchange rate if all you rely upon is what you earn from
exports.
“My big issue with the way the central bank has chosen to manage
the naira is that the it speaks about the reserves and exchange
rate situation as if it is only about trading, and I think they get it
wrong in that regard. It is not all about trading; capital flows
matter.”

Teriba said the restrictive policies had scared capital away from
Nigeria and eroded confidence of wealth holders in holding naira-
denominated assets.
He added, “Countries that get comfortable reserves positions are
countries that have regard for capital flow. They solicit and court
capital flows and encourage people who bring their money into their
jurisdiction to retain confidence in their ability to manage it. That
is the neglected dimension in the face of the increased demand for
forex; the CBN was announcing list of items that you cannot
source official forex to import, and that is very wrong.
“By the time you start telling people that they cannot use their
debit cards abroad, do you think that is going to encourage them
to hold more money in naira? It is going to scare them to even
flee the naira the more.”
The Financial Derivatives Company Limited, headed by renowned
economist, Mr. Bismarck Rewane, in its latest Economic Bulletin,
noted that the next meeting of the Monetary Policy Committee of
the CBN in two weeks would come up at a time when there were
mixed signals on the direction of the monetary policy in the
country.
“The CBN is expected to announce a new forex policy, which will
give it the flexibility to bring the external and domestic economic
variables into equilibrium,” they added.
This may include the announcement of a new exchange rate band,
with a floor of N185 and a ceiling of N220, during the first
quarter of the year, the FDC said.
“Nigeria’s external reserves are below $29bn. The anticipated
adjustment in the exchange rate band is expected to slow-down the
rate of depletion, as the demand pressure eases. However, with oil
prices still soft at $37 per barrel, the likelihood of an accretion
is slim,” the FDC analysts said.
The Global Chief Economist at Renaissance Capital, Charles
Robertson, said he said in an emailed response to questions from
our correspondent, “Given that oil producers around the world are
devaluing, from Azerbaijan to Angola, investors do expect a
similar move in Nigeria.
“Indeed, letting the market set the currency rate could help
President Buhari achieve his anti-corruption goals.”
The Head, Investment Research, Afrinvest West Africa Limited, Mr.
Ayodeji Ebo, said, “The challenges we see around the naira have
continued to compound, and they show that several policies that the
CBN has introduced have refused to yielded any positive results
and that call for a review of the policies.
“The pressure we have seen in recent times, especially last week,
can still be linked to the fact that the demand for the dollar has
not been reduced. It is just that it has been shifted from the
interbank to the parallel market.
“It further buttresses what the IMF boss has reiterated in terms
of being flexible regarding our foreign exchange policies, which
simply put means devaluation, to reflect the current reality that we
are seeing in terms of global oil prices that have been on the
downward trend.”
Ebo said for the CBN to be able to close the gap between the
parallel market and the interbank rates, it would need to devalue
the naira by a minimum of 25 per cent.
He added, “But beyond the devaluation, they also need to watch
the policies so that we don’t see an immediate increase in the
spread between the interbank and the parallel market after the
devaluation.
“So, it is more of policy-driven than just devaluing. If we continue
to hold on to these restrictive policies, then you create arbitrage
and round-tripping and other unethical practices.”
The Managing Director, International Monetary Fund, Ms. Christine
Lagarde, had last week during her visit to Nigeria, said the goal
of achieving external competitiveness required a package of policies,
including business-friendly monetary, flexible exchange rate and
disciplined fiscal policies, as well as implementing structural
reforms.
“Additional exchange rate flexibility, both up and down, can help
soften the impact of external shocks, make output and employment
less volatile, and help build external reserves. It can also help
avoid the need for costly foreign exchange restrictions, which
should, in any case, remain temporary,” she said.
The CBN may revise its target for the naira by more than 20
per cent to 240 to 250 per dollar as oil continues its decline, a
London-based economist at Exotix Partners LLP, Alan Cameron,
said in a research note last week.
Africa economist at Capital Economics, John Ashbourne, said in a
note to clients last Wednesday that Nigeria would be forced to
devalue the naira to around 240 per dollar in the first half of
2016, adding, “Cumbersome foreign exchange restrictions are
strangling economic growth.”

courtesy Taiyescott via www.punchng.com/pressure-to-devalue-naira-grows-amid-cbn-resistance/

Bros we need change not epistle

Lalasticlala, ishilove can we have this piece on the front page please?.
Thanks

TB Joshua actually said this...

"The president will do everything to reject revaluation of the naira – which is a good idea from a good leader. But there will be overwhelming pressure which he will not be able to resist," Joshua purportedly stated in his New Year 'prophecy' on Christian television network Emmanuel TV.

“He has good intentions but a king’s intentions cannot be carried out properly without the support of the subjects. He needs your support to lead us out of the valley,” the cleric added. "Nigerians, support and pray for your leader. The future is crying for help.”

.

Hmmmmm....

Interesting

The Financial Derivatives Company Limited, headed by renowned economist, Mr. Bismarck Rewane, in its latest Economic Bulletin, noted that the next meeting of the Monetary Policy Committee of the CBN in two weeks would come up at a time when there were mixed signals on the direction of the monetary policy in the country.

“The CBN is expected to announce a new forex policy, which will give it the flexibility to bring the external and domestic economic variables into equilibrium,

If the CBN does not relax its suffocating FX control policy in this meeting and chart a new policy course, then I'll give up on the economic direction of this country.

This is dicey...

Cc: lalasticlala, dominique, Mynd44, Seun