Nigeria Economic Council seeks review of forex policy

Nigeria’s National Economic Council an economic advisory body has asked the Central Bank of Nigeria CBN to  review its foreign exchange policy. This is coming on the heels of the continued depreciation of the local currency in the parallel market. The depreciation of the Naira is as a result of the import dependence of the Nigerian Economy. Nigeria export mainly crude oil. The naira fell to a record low on the parallel market, trading at N507 to a dollar. That compares with the official rate at around N305.

Financial institutions have argued that Nigeria must allow its currency to float freely to solve its foreign exchange woes, a measure which has met opposition from President Muhammadu Buhari because the nation will not benefit from further depreciation of the Naira. Devaluation profits nations with high export base. The previous depreciation of the naira has resulted in inflationary pressure with very high food prices with government looking for ways to bring down prices.

The “National Economic Council members it was learnt generally expressed concern over the current situation of the exchange rate and called for an urgent review of the current forex policy, especially the gap between interbank and the parallel market rates,” Silas Ali Agara, deputy governor of Nasarawa state said after the council met.

He added the central bank governor had told the body, which comprises Nigeria’s 36 federal states, Vice President Yemi Osinbajo and other ministers, that patience was needed but that the situation was under control. The NEC’s decisions are not binding but with all states, key ministers and the central bank governor assembled, government and parliament usually take into account their recommendations. Finance Minister Kemi Adeosun, who also took part in the meeting, also said Nigeria’s excess crude account, a rainy day fund, stood at $2.46 billion as of Feb. 15, in line with figures previously reported by the government.

Adeosun said to the council had decided to inject $250 million from the account to the country’s sovereign wealth fund, the Sovereign Investment Authority (SIA) which had been established in 2011 with $1 billion of capital in an effort to manage oil export revenues. The fund is split into three components, a “Stabilisation Fund” to act as a buffer against economic turbulence, an Infrastructure Fund and a Future Generations fund.