Speculations that the Central Bank of Nigeria (CBN) would devalue the naira were quenched on Tuesday as its monetary policy committee (MPC) voted against it.
CBN governor Godwin Emefiele said after the MPC meeting that interest rates would instead be lowered to ease liquidity in the economy.
“The current episode of lower oil prices is expected to remain over a very long period,” Emefiele said.
“Consequently, it is imperative to brace up for a longer period of low government revenues from oil sources which will necessitate hard and uncomfortable choices.”
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He said the 12 members of the committee voted unanimously to keep the rate unchanged.
The naira will continue to exchange at the official window — almost entirely funded by the CBN — for N197-N199, but parallel market rates are expected to jump well above N300 as a result of the announcement.
Emefiele defended the forex restrictions, saying locally produced food such as fish had witnessed increases sales.
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“It has been positive,” he said.
“There is wide room for optimism about the medium to long term macro-economic prospects… especially given the clarity in the policy direction of the administration, the various interventions in the real sector, gradual improvements in the power sector and the reinvigorated fight against corruption.”
President Muhammadu Buhari has argued against devaluing the naira, maintaining that it would only amount to importing inflation since Nigeria is not an exporting country.
Local and international financial experts have been arguing for the currency to be allowed to depreciate to a realistic level so that the economy can attract the needed inflow of foreign investment.
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The MPC also voted to retain the benchmark rate at 11% in order to support the economy which has been hit by falling oil prices.
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