‘Naira adjustment imminent’

Nigeria’s monetary authorities are only buying time before they take decision on adjustment of the “over-pressurised” naira, Biswarck Rewane, chief executive officer, Financial Derivatives Company Limited, said on Tuesday.

Recommending an adjustment of the naira from the current N155 -N160/$ to N155 – N165/$, Rewane said the continued depletion of the nation’s foreign reserves to defend the naira is apparently not sustainable especially in the face of anticipated further drop in oil prices and therefore should be reconsidered.

“We cannot continue to keep the naira at a level which is inefficient. The pressure on the currency is only a question of time”, he said in Abuja at the Second Quarter Learning Series of the Securities and Exchange Commission (SEC).

Rewane said although the CBN designate governor, Godwin Emefiele, has pledged to use all options available to continue to defend the naira, the CBN will definitely accept the reality of naira devaluation earlier than anticipated.

Defending his stance, he argued that fears that adjusting the naira exchange band would hurt the economy are actually not real as the gains outweigh the losses being witnessed now.

He was also of the opinion that global commodity prices which had raised such fears have actually gone down much more than whatever risks the adjustment of the currency is going to place. He said his conviction is that for instance, prices of aluminum have come down by 40 percent, wheat prices are down by almost 25 percent, including the prices of raw materials that are being talked about.

“So most of the raw materials they are talking about globally will actually not be affected by a depreciation in currency”, Rewane argued.

He further explained that currencies are measured against a nation’s trading partners and that the Nigerian partners are mainly non-dollar countries. “So against the basket of currencies, against the pound, Euro, Japanese yen, Chinese Yuan, you may find out that our currency have AA6not actually deteriorated”, he added.

He further argued that allowing the exchange to depreciate would give the flexibility of allowing the interest rates to come down and therefore allow organisations to grow and employ more people.

Rewane projected that currency pressure is expected to increase and that CBN’s tightening measures are only temporary solutions with divergence between the official and parallel market exchange rates now at N6 and external reserves now at $38.1bn, some 22.02% below the 2013’s peak of $48.86 billion.