CBN Governor, Godwin Emefiele, reacts to devaluation of naira call

The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele has reacted to analysts’ projections concerning the devaluation of naira. According to Emefiele’s recent stance, naira devaluation will not be happening anytime soon.

Emefiele reportedly stated that Nigeria’s reserves level remained high and strong enough to be able to meet obligations in the economy despite the recent fluctuations in crude oil prices. He made this known while ruling out the devaluation of naira.

What analysts said about devaluation: Financial experts and analysts, during the 2020 Nairametrics Economic Outlook Hangout, disclosed that CBN might devalue the naira in 2020 as structural imbalances from the revenue standpoint, development in the global oil market and policies from the CBN among others pose a very bleak outlook for the economy.

All the panellists agreed that there is a high tendency of naira devaluation in 2020 as the Central Bank’s benchmarks for Naira devaluation are USD50/bbl oil price and foreign exchange (FX) reserve levels closer to USD30 billion.

Speaking on naira devaluation, Cheta Nwanze, Head of Research for SBM Intelligence, disclosed that keeping the exchange rate stable in 2019 came at a cost, with depletion of the reserves which led the CBN Governor to state the triggers for devaluation – reserves at $25 billion–$30 billion and oil prices at $50–$45.

“The Federal Government’s revenue position is alarmingly untenable, and with the modest increase in the National Minimum Wage still yet to take effect, the CBN simply cannot continue to defend the Naira at current levels. We expect the government to be forced into the hard choice of devaluing the currency sometime within the first half of 2020,” Cheta said.

[READ MORE: CBN raises CRR to 27.5%, holds MPR, other parameters constant)

Emefiele’s response to devaluation call: He said the ups and downs experienced in the reserves have not gone without notice.

“It is important for us to note that reserves is there to meet the country’s obligation. So from time to time reserves would go up and reserves would come down: yes, it is no doubt noticeable, the drop has become so noticeable that people are beginning to say oh, we need resort in the adjustment in the currency.”

He also said, “At a reserve level of about $38 billion today, and crude price at about $57, $60, $65 and sometimes hit $70, we believe that we will be able and we are saying that we should continue to sustain the existing foreign exchange management and stability that we have seen in the market.”

“There’s no need for anybody to ever think that an adjustment would happen. The CBN is able to meet all obligations, the reserve level is high and strong enough to be able to meet obligations in the economy and so there’s no need for anybody to contemplate that.

“We believe crude price at above $60, today at almost about $66/$67, sometimes hitting $70 is a strong level that can be used to support the economy and also continue to sustain the stability that we see in the foreign exchange market today.”