Naira is undervalued, says ex Minister
A former Minster of Finance, Dr. Anthony Ani has decried the current call for devaluation of the naira, saying the currency is even undervalued.
Ani stated this at the induction ceremony of the new members of the Institute of Chartered Accountants of Nigeria (ICAN), which took place in Lagos last week.
Speaking on the topic: “Of Exchange Rate Mechanism, Exchange Rate and Devaluation”, Ani said President Muhammadu Buhari should continue to resist the pressure to devalue.
“There is nothing to gain from devaluation since we do not export anything significant except our crude oil. Any devaluation will further worsen our economic situation and will send the cost of all our imported goods to the skies. Already, our imports are the most expensive in the world.
“Nigeria was removed from the community of nations that adopts letter of credit for its export business and as a result no bank in Nigeria (not even our CBN) can operate letters of credit. We have to do this through correspondent banks and this means paying for our imports upfront with the attendant commission, fees and interest charged by the correspondent banks. A devaluation in addition to the ban on letter of credit will greatly increase the cost of imported goods,” he said.
While saying that outbound money transfer service should be stopped and all remittances retained to stabilise the exchange rate mechanism, the former minister recommended that all the excess liquidity in the banking system arising from foreign exchange operations should be mopped up and retained by the Central Bank at zero per cent interest. “This amount may be used for development while being retained by the CBN,” he added.
He also recommended that the CBN must continue to play the central role in the Autonomous Foreign Exchange Market, stressing that the apex bank “should fund the real sector of the economy without exception for its foreign exchange requirements. Any prohibition should be done by tariff adjustment. Commercial banks will fund the other sectors.”
He said further that the CBN must allow the Bureau De Change (BDG) to operate on its own and must stop funding them. All their deposits should be returned to them.
According to him, Nigeria must find its way back into the community of nations operating letters of credit. A situation where we operate through correspondent banks makes our imports to be expensive and have adverse impact on the generality of Nigerians.
Our motto should be production production, production. We must repair our refineries and produce all our petroleum product needs. We must produce our food requirements. We must diversify our economy’’, he said.Ani added that neither devaluation nor flexibility of the exchange rate is the answer to our problems.
Our exchange rate mechanism was destroyed when we were cajoled into debt cancellation programme. We must restore this mechanism and adopt a realistic exchange rate. We must make the naira to be internally convertible again; we must realise that the naira had in the past been over-devalued with no corresponding production or productivity to follow. I hold the view that Nigeria must not devalue and that President Buhari is right in resisting devaluation’’, he said.
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