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The Nigerian government warned the coronavirus pandemic could set off an exchange rate “realignment,” in a rare acknowledgment by an administration that has made a stable currency a key economic pillar.
After meeting with his new Economic Advisory Council, President Muhammadu Buhari said the country needed to prepare to take “tough economic decisions.”
A global recession “could slow down Nigeria’s fragile growth and trigger exchange rate re-alignment,” the presidency said in a statement summarizing discussions.
Last week the central bank denied it had plans to devalue the naira at this time, amid speculation of a mark down. The currency has remained largely stable over the last two years under the management of the central bank.
Crashing oil prices have increased pressure on the naira as foreign reserves in Africa’s top oil producer falls rapidly. Nigeria relies on crude sales as its main source of hard currency.
“These lines make me hopeful that they are coming around to considering a devaluation in the near term, instead of prevaricating,” said Yvonne Mhango, a sub-Saharan Africa economist at Renaissance Capital.
The advisory group, headed by a former central bank board member, Doyin Salami, recommended the securitization of government debt, a new revenue stabilization program and cutting costs. The council voiced concerns over worsening economic fundamentals reflected by quickening inflation and weak external sector, the statement said.
By Alonso Soto