The CBN Governor was interviewed by the Financial Times on Friday on his foreign currency policies which has attracted both local and international scrutiny. We at Nairametrics have looked at the about 3,834 words transcript and picked out 10 critical things we learnt about why and how Emefiele is fighting so hard to sustain the value of the Naira. Here they are;
- Demand Side Management
The Governor in the interview mentioned the phrase “Demand Management” about 8 times as the major policy throng the CBN was relying upon in its fight to save the Naira. Demand Management according to the CBN is basically a tool used to control the demand of forex in the country. For example, excluding 41 items from accessing forex in the official market reduces demand for forex as people who typically access the market for that forex will no longer be able to that.
- He has given up on inflation
The CBN Governor also made it known that with or without these policies we are already screwed up by inflation. According to him. Devalue the naira like some want and inflation will still rise or continue with these same policies and inflation will still rise. Bottom line is to continue with these policies and hope that “by the time productivity from this planting season begins to come up, we would be able to moderate prices and inflation”
- He is trying hard to avoid confirming or suggesting that there will be another devaluation
He refused to answer this question directly. Rather he said that when they devalued they were looking at the supply side of things. Currently they are looking at the demand side like we explained and that when they have achieved their desired results as per demand management they can then decide what to do with the naira. But for now they think it is appropriately priced. When probed again he said “the naira is appropriately priced and that he indeed will not want to talk about that again.
- He thinks the parallel market is a piece of sh&t
He said the parallel market is a “shallow market” and constitutes “just about 5 per cent of the market” therefore it should not be “a basis or a benchmark for determining the real value of Nigeria’s currency.” He buttressed this view by explaining how the price of the naira crashed from about 240 to N210 in the parallel market after banks said “we don’t want the dollar cash, because we don’t know how to get real value for those dollars sitting in our vault”
- We now know our Banks are “full of dollars”
When asked if banks are full of dollars, the CBN governors emphatically said “Correct”
- On whether the ban on 41 items is a temporary or permanent measure
He said he will like it to remain permanent and that it is sustainable in his opinion
- On whether any stolen money has been recovered since Buhari came into power
He said NO that no stolen money has been returned yet. So what then is all the noise about?
- He is in a silent policy war with BDC’s
Emefiele seems to be on a mission to prove to BDC’s that his policies will eventually stifle the black market and get them to conform
- On this also being a spiritual battle
He went spiritual “praying that there will not be shortages.” He also believes shortages is probably going to create an opportunity for local production to fill the gap
- On Speculation and Speculators
The Governor blatantly blames speculators for the currency pressures we are experiencing. He in fact used the words speculate, speculators, speculation about 6 times throughout the interview. In one particular sentence he speculative three times
“We think there is enough liquidity in the market. and those demands you find are indeed speculative demand. Substantially speculative. And with time we will prove again that these are speculative.”