Another major policy summersault by the present administration may soon be experienced, as Vice President Yemi Osinbajo has hinted that the government may adopt a more flexible option in the management of foreign exchange.
The flexible option, according to analysts, would portend devaluation of the nation’s currency, which currently exchanges for N197 to the dollar at the less accessible official window, against N318 it is currently trading against the green back at the parallel market.President Muhammadu Buhari has consistently affirmed that the naira would not be devalued, despite some pressures from within and outside.
The vice president’s statement is coming on the heels of recent hike in petrol prices in the country, under a new deregulated regime, despite the known stance of Buhari to the contrary.
Osinbajo, at an investors’ forum hosted by Renaissance Capital in Lagos on Wednesday, explained that the more flexible foreign exchange policy would “be able to attract more capital into the system and ease business.” “We believe there must be some substantial re-evaluation of the foreign exchange policy, especially with a view to increasing foreign exchange supply, encouraging capital importation and also being able to allow free flow of remittances…we expect that with a more flexible policy, we will be able to attract more capital into the system and ease business,” Osinbajo added.
The vice president, who admitted that the executive was “not responsible for monetary policy,” however, added that he hoped the Central Bank of Nigeria (CBN) would act soon on this policy change.
Despite the decline in foreign exchange earnings due to the tumbling oil price, President Buhari has held tightly to his view that the naira should not be devalued further. Since taking office nearly a year ago, he has repeatedly voiced his support for the CBN Governor, Godwin Emefiele’s pegging of the naira’s official rate at 197-199 against the dollar since March 2015.
“We have effectively liberalised downstream sector of oil with a N145 price ceiling. Just not enough forex to continue NNPC fuel importation,” Osinbajo said.
He said he hoped to persuade the CBN to change some polices to improve foreign exchange supply, adding that the government would make sure that the banks survive an economic crisis due to a slump in oil revenues. “We will do anything to ensure that the banks remain viable.”
On the renewed attacks on oil installations, he said: “We want to increase security around installations and we have to use a bit more technology and a dedicated force.”
Osinbajo, who addressed the over 100 investors and corporate representatives at the seventh edition of the Rencap annual pan Africa investor conference, also spoke on some key areas -quick deliverables in the budget that the government intends to focus on, including power; transportation-rail project; housing among others.
The Chief Executive, Financial Derivatives Company, Bismarck Rewane, who hailed government’s moves towards full deregulation of the downstream sector, insisted that this should be followed with devaluation of the embattled currency.
“We must follow this with naira adjustment to say around N230 to the USD and if this happens, we will begin to see the parallel market rates drop to around N255 as we inch towards equilibrium. So what will be required will be a minimal naira adjustment. A very good start,” Rewane said.
Some analysts said last night, that Osinbajo’s revelation is a welcome one, since President Buhari had refused to devalue, despite public outcry for it in the past few months.