Call for Nigerian naira devaluation heightens as analysts list benefits

Sterling Bank plc last weekend provided the much-needed platform for further discourse on the inevitability of the devaluation of the local currency, the naira. It was a training session for financial journalists in Lagos.
Analysts at the forum concluded that the naira stands to gain from early action by the Monetary Policy Committee in terms of adjustment in value.
Bismarck Rewane, managing director/CEO, Financial Derivatives Company Limited, said the much-debated currency adjustment or devaluation would sooner or later take shape.
He emphasized the need for the Central Bank of Nigeria to come up with a mechanism that determines the exchange rate rather than looking for the rate of exchange.
Jurgen Hecker, France-based financial expert and media trainer, who corroborated Rewane, said devaluation of the naira was not a huge problem for the government.
The two economists who facilitated the training advised the apex bank to devalue the naira as one of the likely responses to the realities in the global oil market.
Hecker said devaluation would make the currency more realistic and may cause new industries to come up because the issue of diversification would be taken seriously so that the country could export more as its exports become cheaper. He noted that persistent drop in oil prices posed a problem for current account deficit, and serous drop in revenue.

Atilade, Jurge and Rewane

“It is not about how much money you earn. It is about how efficient market has become, thereby making prices efficient and people have income to spend. Efficient market means that you have limited barriers,” Rewane said.
He said it would be impossible for the local currency to firm up appropriately until certain bottlenecks like subsidy leakages are removed by the new administration, adding that as long as the government was hesitant to remove subsidy on petroleum products, the heightened demand for dollars by the marketers,among others, would continue to haunt the economy.
Rewane, who sees devaluation at this stage of the country’s economy as not about what “we want, but what needs to be done”, said there should be a process that leads to determination of naira exchange rate rather than defending and fixing rates overnight.
According to him, monetary and fiscal authorities have to understand and agree that the problem has reached advanced stage which requires optimal solution.
“If you don’t do the right thing at the right time, you will do more,” Rewane said while making presentation on interest rates and exchange rates.
Abubakar Suleiman, executive director, finance and strategy, Sterling Bank, said the bank has maintained its leadership in addressing unemployment, environmental issues and education, among others.
“Very soon we will do national mathematics competition and give scholarship to winners,” he said.
Culled from Businessday