Osinbajo, Joseph Sanusi Disagree on Naira Devaluation

Prof. Yemi Osinbajo, Nigerian vice president

• CBN: Naira stronger than dollar in purchasing power parity Apex bank redeploys directors

Vice President Yemi Osinbajo saturday reaffirmed the Federal Government position that the country’s currency would not be devalued in spite of pressures to act otherwise.
But a former Central Bank of Nigeria (CBN) Governor, Mr. Joseph Sanusi, warned that delaying the devaluation was akin to “postponing the evil day.”

The different positions were taken at a town hall meeting that the Vice President held with his co-tenants in Victoria Garden City (VGC) on the Lekki-Epe axis of Lagos, according to a News Agency of Nigeria (NAN) report.

At the event, Osinbajo re-echoed President Muhammadu Buhari’s position, insisting that devaluation was not on the table.

“That is the position of government,” he said.
However, Sanusi, a VGC resident, advised the government to either devalue the currency or stop the confusion between the official and parallel market exchange rates.

Sanusi said allowing an official rate at N197 per dollar while the parallel market sold for over N300 was “distractive”.

“Naira is already devalued and government not accepting it is postponing the evil day,” Sanusi said.
Sanusi, who was governor of the apex bank between May 29, 1999 and May 29, 2004, is the third former CBN governor that would speak-out on government’s economic policy as it affects devaluation and foreign exchange rate.
Last October, former CBN Governor, now Emir of Kano, Lamido Sanusi, had called on government to devalue the naira and warned that Africa’s biggest economy was in danger of a long-term slump unless government confronts slowing growth.

“Let’s stop being in denial, we cannot artificially hold up the currency,” Sanusi had counseled, and noted that President Buhari “needs help on the economy.”

His predecessor in office, Professor Charles Soludo, in his appraisal of the state of the economy last November, had also said the politics of naira devaluation and CBN’s promotion of fixed exchange rate was not good for the economy, and warned that “The economy has always done worse in fixed exchange rate regime. Capital will fly out. Such policies do more harm than good. Capital flight in a country that is in dire need of capital is bad. Private capital is on the run.”

Reiterating government’s position yesterday, Osinbajo said CBN will operate in line with the speech delivered by President Buhari after he was elected to come up with flexible exchange rate to be supported by strong monetary policies.

He said the foreign exchange policy of government was to stop unnecessary consumption of imported goods and promote local manufacturing.

Osinbajo also said government met a falling revenue profile in May 2015, which was down by about 70 per cent compared to the same period of the preceding year.

He also said in spite of the high cost of about $22 to produce a barrel of crude oil, now selling at about $33 dollars, no fewer than 38 per cent of the foreign reserve was spent on importing petroleum products.

The Vice President said the previous administration was spending about N20 billion on food importations annually, which reduced the nation’s foreign reserve drastically from about $40 billion to about $25 billion.
As a result, he said, the current administration was bent on diversifying the economy from crude oil to agriculture and solid minerals production.

Osinbajo said the focus on agriculture was to make Nigeria self-sufficient in rice, poultry and palm oil production as well as develop the entire agriculture value chain to create wealth and jobs for the teeming youth.

The vice president further stated that the current administration targets 2018 for complete reliance on refined petroleum products, adding that the petrochemical industry, railway infrastructure and provision of other infrastructure were atop the priority of the federal government.

He told the VGC community that the major areas of focus of the Buhari administration were security, governance, anti-corruption and economic rejuvenation.

According to him, Boko Haram insurgency had been degraded as a “military might” although pockets of suicide bombings still take place.

“This is a challenge we must tackle going forward but the other challenge is the over 2 million people displaced by insurgency who need resettlement,” he added.

He said the idea was to re-settle the people back to their farming occupation first, but that would be after the entire North-east land had been de-mined.

He restated that in governance, corruption was a critical issue because “the whole system, both public and private, is replete with corruption which has become the rule rather than the exception.
He recalled the armed purchase scandal “where a huge amount of money was spent but unfortunately it went into private pockets.”

He recounted that fake Armoured Personnel Carriers (APCs) and fake bullet-proof vests were purchased for soldiers thus endangering the lives of anti-terrorism combatants. “Unless we seriously fight corruption through a systematic rebirth of our public system, the future of the country is in grave danger,” Osinbajo said.

He said the administration had a robust plan to uplift education standards through the recruitment of 500,000 additional graduate teachers to serve in the rural areas, development of materials for teacher education and focus on science, engineering, technology and mathematics education.

He said Buhari had put together an asset recovery team, adding that looted assets and funds recovered would be returned to the federation account.

Osinbajo also announced that all idle mining licences issued by the past administrations were being mopped up, while the government was reviewing the contract signed between the CBN and Systemspec on remittances made into the Treasury Single Account (TSA).

Meanwhile, despite the volatility in the value of the naira as measured against the United States dollar, CBN yesterday said the national currency was stronger than the greenback as far as the purchasing power parity of the two currencies is concerned.

The CBN Deputy Governor, Financial System Stability, Mr. Joseph Nnanna, who spoke with THISDAY, noted that the position of the local currency in relation to the dollar might not be as bad as it is currently painted in some quarters when viewed in the light of the purchasing power parity, which offers a “true determination of the value of a currency.”

The purchasing power parity (PPP) compares two currencies in different countries based on the price of similar goods.

Nnanna expressed dismay that Nigerians had apparently taken a position against the naira pointing out that the current volatility in foreign exchange was largely induced by speculative activities.
“You would agree that N100 could buy more items than $1 would buy in America,” he said.

Giving an analogy to buttress his point, he said:”With N100, you can buy maybe two corns and this is a corn season, but with $1, you can’t buy a corn in America. So in that comparison, which is the stronger currency? The money that can buy two corns or the one that cannot buy a single corn.

According to him, “We can buy two corns for N100 now because this is their harvest season and corn is available. If our people didn’t go to farm to plant corn, can we have corn to buy? If corn is off season, N100 will not buy you a corn, it will become more expensive.

“I just brought this illustration to tell you that a country’s currency is a measurement of the total productivity of that country. If we don’t produce, there’s no way our currency can be strong and unfortunately for Nigeria, we produce what we do not consume and we consume what we do not produce.”

” That’s why everybody is looking for dollars to import from abroad and when you do that, importing from abroad, you are actually exporting jobs and creating unemployment. So when people are saying the naira continues to fall, what we are saying is that our productivity has continued to decline,” he added.

According to him, “at the moment, the exchange rate you see in the parallel market is due to speculations. Nigerians are taking position against their own currency which is unfortunate. If you look at the purchasing power parity, which is a true determination of the value of a currency, you would agree that N100 could buy more items than $1 would buy in America.”

On the high rate of the dollar at the parallel market due to shortage at the official window, the CBN deputy governor said:”Yes, it is a good issue but the dollar is scarce, we don’t use dollar in Nigeria, we use the naira-Is naira scarce? Naira is not scarce; the reason why they are looking for the dollar is because they want to import, they are importing the things we don’t have; but those things they are importing are the things we can produce.
“I go back to my first analysis that a currency is as strong as the GDP of that country; so if we can produce locally, we don’t need the dollar but because we are not producing, that’s why people need the dollar to import.”
Asked if they would not be forced to consider a devaluation of the current and review its policy on the 41 items banned from accessing forex from the official window, Nnanna said:”We do not see any need to devalue the naira as of now.”

He added:”If the time to devalue the naira comes, we would do so but for now, there’s no reason for that. At the so-called parallel market or black market, where they are selling a dollar at N375, how many people are patronising the market? Are they smugglers? Are they people, who want to take away money from the country? If you make your money in a genuine way, will you truly spend N375 for $1?”

Continuing, he said:”We didn’t ban any item; This CBN you see here has no power under the constitution or the laws of central bank to ban any item. All what we said is simple: we don’t have dollars, so these items like toothpick, textiles, eggs that we can produce in Nigeria-we don’t have dollars to give to you to import them.

According to him, “If you want to use toothpick…If you want to eat egg, go to the poultry and buy egg, our egg is also good, if you want to eat rice, please go to Nasarawa State, go to Ebonyi State, go to Kebbi State, they have rice. That’s what we are saying but if you have your own dollar and you want to bring those goods, we clap for you and say go and bring them but with your own dollar.”

Meanwhile, the naira appreciated to N320 against the dollar at the parallel market last Friday, higher than the N330 to a dollar it recorded the previous day. However, a shakeup has occurred at the CBN with the portfolios of some directors reshuffled.

According to sources within the CBN, Mr. Edward Adamu, has taken charge as the new Director of Human Resources while Olasukanmi Gbadamosi is now Director, Legal Department. Besides, Dr. Alvan Ikoku has emerged the new Director, the Trade & Exchange Department (TED). Chizoba Mojekwu is now in charge of the Capacity Development Department, which takes care of the International Training Institute (ITI) Learning Centre.

Also affected in the redeployment exercise was Director of Corporate Communications, Ibrahim Muazu, who has now been posted to the Strategy Management Department (SMD).

THISDAY however gathered at the apex bank saturday that though the development could not be refuted, there had not been any official statement on the deployment.

Muazu, in a telephone interview, said a formal communication would be made next week to provide a clear picture. No replacement had however, been announced for a new spokesperson for the apex bank.