Buhari has given the central bank the go-ahead to introduce a more flexible exchange-rate system even as he remains opposed to devaluation of the naira, said Garba Shehu, his spokesman.
“The president is opposed to devaluing the naira, he has said so repeatedly,” Shebu said in an interview on state-controlled NTA Television on Monday. “He has given them leeway to introduce what he has called ‘flexibility in managing’” the currency’s value, he said, referring to the central bank.
Buhari said at the weekend he supported a stable currency, though he would keep “a close look at how recent measures affect the naira and the economy.” The comments, made four days after the Central Bank of Nigeria said it planned to introduce a more flexible exchange-rate regime, left traders guessing whether he supported those measures.
“We see this as a welcome development as it will help reduce the uncertainties regarding the expected policy framework on foreign-exchange flexibility announced by the CBN governor last week,” analysts at Lagos-based Investment One said in an e-mailed note Tuesday. “We see the move towards a market-determined exchange rate from both fiscal and monetary authorities as a catalyst for increased economic activities.”
Nigeria has held the naira at 197-199 per dollar since March 2015, even as other oil exporters from Russia to Colombia and Malaysia let their currencies drop amid the slump in crude prices since mid-2014. Foreign reserves dwindled as the central bank of Africa’s largest oil producer defended the peg, while foreign investors, fearing a devaluation, sold Nigerian stocks and bonds.
Three-month non-deliverable naira forwards have weakened 35 naira to 285 per dollar since the central bank announced its change of direction, suggesting traders anticipate the currency may trade near that level in the event of a devaluation.
Central bank Governor Godwin Emefiele said on May 24 policy makers were considering a two-tier currency system, with the naira trading nearer a market-related level in the interbank market while the central bank would continue to allocate dollars to strategic industries at a fixed rate. He said the new system would be implemented “in the coming days.”