The Central Bank Governor met with reporters last week where he took questions on the state of the economy and particularly on the devaluation of the naira. The Governor who has come under fire in recent months over his policies has appeared defensive anytime he is put on the spot. In line with his combative approach to issues concerning the naira, he once again defended his position not to devalue the naira and why capital controls is the way to go. According to PM News, he even promised a “robust economy for 2016”. We took a look at his latest rant and deduced the following;
Accuses Nigerians of patronizing black market
The CBN Governor was quoted to have blamed speculators for the current pressures facing the naira. That would have been fine if it had ended there. According to PM News Emefeile advised Nigerians to always approach their banks for their request for foreign exchange at the official rate as against patronising the black market operators. ‘’CBN does not have plenty dollars to sustain the bureau de change.”
This statement seems rather odd as no one in his right frame of mind will buy dollars from parallel market if they had access to the interbank market. Besides, the so called interbank market currently sells dollars at black market rates yet cannot meet the demand. Nigerians are basically patronizing black market because that is the only place they can get dollars without restrictions.
Doesn’t want to admit how bad things are
Mr Emefiele, a Finance Graduate was also quoted to have said that Nigeria’s situation was not as bad as people think
‘’Our situation is not as bad as people think. When you devalue, there must be a structural adjustment. We have never followed up with structural adjustment. So, the approach we are adopting at the moment is that, having done a 22-per cent adjustment in the currency, let us structurally adjust our position.”
When the CBN devalued last in February Oil price was still trading above $60. Today, it is down by half to about $35. The implication for those who call for devaluation is that the naira is overpriced structural adjustment or not. In fact, they believe one the first structural adjustment required is to further devalue the naira. So it is either he is living in denial or know something a lot of Nigerians currently do not know. Either way, things are pretty bad and he would not admit that much.
He is not about to relent on controls
The CBN Governor has often said that demand side management of the exchange rate was his key policy thrust. He reiterated this again by saying ‘’The solution to free fall of the naira is by controlling the demand for foreign currencies such as the dollar.”
This is not rocket science and Nigerians understand this is an issue but where those for devaluation do not agree is stifling access to forex just because you want to artificially control not just the demand but the price that you sell forex. Nigerians are already neck deep in their thirst for foreign goods and services and cannot at this time be required to adjust when there are not enough local substitutes.
Says Civil Servants should engage in farming
This perhaps was one of the most cynical statements he made according to some analysts. According to Emefiele. “Public servants should also engage in farming because the only business public servants are allowed to engage in is farming. And you don’t need power to farm tomato, vegetables or fish.’’ It is statements like this according to analysts that suggest he is out of touch with the economic challenges of the ordinary Nigerian. Most Nigerian civil servants already engage in one trade or the other just to augment their income. To think they are not engaging in farming is rather unfortunate. Besides, how do they acquire land? How will you not need power for your farm?
Reserves are no longer there
This perhaps is the most honest statement he made regardless of the context. According to him
‘’Let us say, look, stop importing rice; stop importing toothpick; stop importing tomato from South Africa; stop importing 20 million eggs daily from Africa. That’s the gist of what we are saying. We are saying Nigeria can do without these items. And the truth is that the reserves are no longer there.’’
Analyst believe the current reserves of about $29 billion is probably lower than that. They point to currency swaps that the CBN engaged in which by the way it no longer publishes on its websites. They also point to the fact that if you net out unmet demand from that figure, the reserves is less than $20billion which puts it at just about able to fund only two months of imports.
