Devaluation Of Naira Not Appropriate In Economic Realities – Osinbajo

Yemi-OsinbajoNigeria’s Vice President, Professor Yemi Osinbajo, has said that devaluation of the Naira is not an appropriate option in the current economic realities in the country and offers no solutions as far as the Buhari administration is concerned.

According to a statement by the Senior Special Assistant – Media and Publicity to the Vice President, Laolu Akande, President Muhammadu Buhari had earlier expressed his views that a further devaluation of the Nigerian currency is not healthy for the Nigerian economy.

The Vice President received the Italian Ambassador in Nigeria, Mr. Fulvio Rustico and the Canadian High Commissioner in Nigeria Mr Perry John Calderwood in his office on Thursday and spoke in a similar vein about the Naira.

“I don’t agree with devaluation and it is not that I am doctrinaire about it. In the first place, it is not a solution, we are not exporting significantly. And the way things are, devaluation will not help the local economy.”

“What we need to do is to start spending more on the economy and then things will ease up a bit,” he said.

He observed that the issues around the Nigerian economy required reasonable flexibility in dealing with them.

The Vice President outlined the Federal Government’s plans to set up a $25 billion infrastructural fund which would be sourced from local and international sources including through Nigeria’s Sovereign Wealth Fund and also the pension fund among others.

He disclosed that the fund would be used to address the nation’s decaying road, rail and power infrastructures.

“This is our approach to speeding up the country’s infrastructural development,” he added.

Foreign Exchange Restriction

Professor Osinbajo also stated that the current foreign exchange restriction is a temporary measure to ensure that “we don’t deplete our foreign exchange substantially at a time when the prices of oil in the international market is dropping”.

He added that the restriction would also bring some stability to the country’s foreign reserves without which Foreign Direct Investment, FDI, might be affected.

In his reckoning, FDI is more forward looking than portfolio investments which is being affected by the decision to manage the foreign exchange resources of the country.

“I am not sure devaluation is the issue, but how to ensure foreign direct investment which is more useful,” the Vice President noted, adding that he expects a bit more stability and direction in the next few months.

He disclosed that the Federal Government would work with the Central Bank of Nigeria to ensure that legitimate businesses are not badly impacted by the current foreign exchange restrictions, especially those who have previous contracts and loan commitments.

He expressed the appreciation of the Federal Government to both envoys on behalf of President Buhari and also said that he looked forward to closer and deeper ties between Nigeria and the two countries.

A delegation of top executives from Citigroup led by Mr. Jim Cowles also paid a courtesy call on the Vice President earlier on Thursday.

Devalued Naira: Expect High Impact On Businesses, Job Creation – Nweze

Austin NwezeA professor at the Pan Atlantic University, Austin Nweze, has asked citizens to brace up for the impact of the decision taken by the Central Bank of Nigeria to devaluate the naira and increase interest rate, noting that this would affect businesses and ultimately, job creation.

While shedding light on the implications of the CBN’s action, Nweze stressed that business owners should expect to pay up to 30 percent interest rates if they obtain loans from the banks and since entrepreneurs are the major job creators in any thriving economy, it will discourage them from expanding their ventures. Hence, unemployment rate will not reduce.

Asides from the impediment to business growth, citizens should also expect high cost of goods and services because of the structure of the economy, Nwaeze said, noting that “Nigeria’s economy is import dependent”.

“The domestic production is below 4 percent as manufacturing contributes less than four percent to the GDP”.

He also warned that an increase in fuel price should be expected in 2015, insisting that the proposed austerity measures to combat the slump in global oil price should start with the government.

What he described as the ‘unholy trinity’ including the interest, foreign exchange and inflation rates would be affected as well because “as you’re fighting inflation, the interest rate has a way of influencing the whole economy.

He noted that there had always been the danger of depending on oil as the nation’s major stream of income, adding that “I thought that we would have learned from the past experience because this is not the first time it has happened.

“When Soludo was CBN governor, this kind of thing happened. There was not enough dollar to finance the budget. He had to devalue.”

This led to some people becoming naira billionaires by reason of exchanging dollars they had previously stacked up, Nweze said, adding that the same thing has happened again.

He insisted that it was time for Nigeria to restructure its economy away from oil, noting that as at 2008, the United Arab Emirates had only five percent contribution from the oil sector to the GDP but Nigeria has over 90 percent.

On the CBN’s action to counter the effects by devaluing the naira and raising interest rates, Nweze supported critics who have said it is not a good mix.

He stressed that a 13 percent interest rate will have severe impact on businesses and this would in turn affect job creation on the part of entrepreneurs.

Commenting on the CBN’s explanation that the action was taken to curb frivolous demands of the dollar, Nweze noted that the demand for dollar would be on the increase by high class citizens who would want to be able to leave the country in case of any crisis, as the election year draws near.

“Most rick men who don’t have confidence in this country are staking up dollars”, he said.