An international economic think-tank has questioned President Muhammadu Buhari’s calls against the devaluation of the local currency.
The criticism comes amid the lack of clarity in economic policy.
Buhari’s sentiments and the arguments posed by analysts follow the Naira searing under pressure from the United States greenback, culminating in calls to devalue.
“President Buhari joined the CBN’s chorus line by stating that the Naira should not be devalued,” said the Rand Merchant Bank (RMB) Global Markets on Thursday.
“Nigeria’s commander in chief believes that a further upward adjustment to the peg would be “unhealthy” for the economy, claiming that the central bank’s measures are intended to prioritise foreign exchange flows.”
Also read: Buhari promises not to devalue naira
However, RMB warned, the imposition of strict administrative measures since June 2014 had effectively stifled the interbank market, restricting access to foreign exchange.
“At this stage, it is difficult to follow the President’s thinking given a lack of clarity regarding Nigeria’s economic and fiscal policies — key cabinet positions remain vacant,” the think-tank added.
RMB added the economy’s structural challenges required a weaker currency to adjust for current and fiscal imbalances.
“However, the state and Central Bank of Nigeria are fearful of the pass-through to inflation. The upshot is that anchoring the currency will further drag on the flagging economy.”
RMB said it continued to believe that the interbank rate remained a poor indicator of changes in local demand, vacillating in a two Naira range.
“Movements in the parallel market rate as well as non-deliverable forward prices are more indicative of changes in perception regarding regulatory risk, global demand, commodities prices and general liquidity conditions,”
said the financial markets watcher.
- CAJ News