Nigeria’s Central Bank Chief Emefiele Defends Exchange Rate Policy, Says Country Facing Peculiar Challenges

Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, on Thursday defended the apex bank’s managed-float exchange rate system, stressing that it was adopted to address the peculiar challenges the country faces.

In addition, Emefiele, reiterated that he was focused on his job and remains committed to supporting the fiscal authorities in ensuring that the country surpasses the 3.4 per cent Gross Domestic Product (GDP) for 2022, that had been predicted for Nigeria by the International Monetary Fund (IMF).

This was just as the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, on Thursday, expressed optimism that once the Dangote Refinery becomes functional, the burden of petrol subsidy would be lifted from the country.

They both spoke during an interview with journalists on the sidelines of the IMF/World Bank Spring Meetings in Washington DC, United States of America.

The President of the World Bank Group, Mr. David Malpass, had on Wednesday, said there was need for Nigeria to do away with its multiple exchange rate system, which according to him was often, “complicated and is not as effective as it would be if there were a single exchange rate.”

Malpass, had also faulted the country’s petrol subsidy policy, which is expected to gulp N4 trillion this year.
But responding to a question on the call for a single exchange rate window, the CBN Governor stressed that, “different countries have different challenges and must develop solutions that would help address their challenges.”

He added: “Both the IMF and World Bank are our prime development banks, and we have receive support from them at different times in resolving some of our economic challenges, particularly bothering on finance.
“Nigeria’s situation is very peculiar and that is why we have continued to engage the IMF and World bank to show understanding in our local problems. And they are indeed showing understanding.

“Yes they want us to freely float the exchange rate and you do know that this will have some impact on the exchange rate itself in the sense that when you allow that to happen, you will have some uncontrollable spiral in the country’s exchange rate.”

According to Emefiele, what the CBN had been doing was to ensure that, “even as we run the managed float, there should be some interventions put in place to really control exchange rate.”

He, noted that as long as the demand for forex exceeds the supply, the challenge would persist, saying, “we are doing everything possible to restructure the base of the economy through some of the policies that we have put in place to deepen the production of goods in Nigeria.”

Emefiele, pointed out that the central bank would continue to make the IMF and World Bank understand the peculiar situations that Nigeria faces and how to tackle them to see the progress of the economy.

Responding to a question on the commendation received by the IMF over the positive momentum in Nigeria’s non-oil sector, Emefiele said: “I am happy that the IMF and World Bank are seeing efforts to drive non-oil exports. Before now, we have always relied on earnings from crude oil as well as foreign portfolio investments and foreign direct investments.

“We will continue to look at how to improve non-oil exports, particularly through export proceeds and so on. I am happy that other people outside Nigeria are seeing these efforts and this means we will continue to do more to ensure that we really deepen this and fund imports with proceeds from exports and with less reliance on the central bank.”

Commenting on the global concerns about surging inflation, Emefiele said: “I must say that in the last two years, the CBN has adopted price stability that is conducive to growth. This means that generally, that we have been tightening, but again in some priority sectors of the economy, like agriculture and manufacturing, we have adopted somewhat of accommodative monetary policy stance and this is why you can see that people can raise 10-year loan with two years moratorium at singe interest rate for agriculture and manufacturing.

“That is why you can see that whereas inflation is coming down gradually, the output, which is growth is increasing at the same time, which is a good result for Nigeria. Consequently today, as a result of global challenges we face, the geopolitical tensions between Russia and Ukraine, the main issues is rising energy and commodity prices which has led to acceleration in the rate of inflation and at the same time dampening growth globally.

“What I am saying is that we are tightening generally, the banks can confirm this, but at the same time, we are adopting some of accommodation to support growth through some priority sectors of the economy.”

Emefiele reiterated that he remains focused on his job as a central banker, assuring the central bank would continue to support the fiscal authorities to ensure the country records positive economic growth.

“We remain focused on our job and we are happy that we are playing our role in supporting the Nigerian economy. We have been on this since 2015, when inflation rate was almost at 19 per cent, it came down to almost about 11 per cent because of the increase in energy prices as well as electricity prices.

“It went up to almost 18 per cent again and we have managed to bring it down to below 16 per cent. I believe we would continue to rein in inflation.

“On the other hand, we are doing everything possible to support the fiscal authorities by putting in place facilities to support households, businesses and others at single-digit interest rate and that has helped in accelerating output and we feel delighted that even at this meetings, amongst other countries, the IMF has held a positive position about Nigeria’s growth prospect at 3.4 per cent and we believe that all things being equal we are going to surpass it. So, what we are doing is to continue to focus on our job and nothing more,” he explained.

Meanwhile, Ahmed, while responding to Malpass comment that the country should reconsider the huge payments to petrol subsidy, said: “The decision to remove the subsidy was deferred. We have information from Aliko Dangote himself that the refinery would become functional by the end of this year, and we are hoping that it walks out that way because it will be in our interest. It means now that we can have the refined products locally as opposed to importing them, it will definitely reduce the cost on the citizens.”

Obinna Chima in Washington DC

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