Nigeria’s Vice President Yemi Osinbajo has explained that contrary to insinuations that he advocated a devaluation of the naira, he actually made submissions about flooding the country with foreign exchange and thus improving the health of the local currency.
“Prof. Osinbajo is not calling for the devaluation of the naira,” the VP said in a Tuesday Press Statement by Laolu Akande, Senior Special Assistant to the President on Media and Publicity.
According to Osinbajo, the huge N160 gap between the N410-per-$1 official CBN exchange rate and the street value of N570 would continue to incentivise Black Market operators.
“Such a massive difference discourages doing proper business, when selling the dollar can bring in 40% profit!” said the Senior Advocate of Nigeria (SAN) Osinbajo.
The new statement appeared to have been made to blunt the edge of criticism trailing his Monday pronouncement.
Osinbajo, in his 45 minutes presentation, had ruffled feathers on Monday during the midterm review of President Muhammadu Buhari’s second term in office.
Apart from explaining how the country’s Economic Sustainability Plan helped Nigeria exit recession, Osinbajo (who heads the government’s economic team) went on and told a hall filled with ministers, captains of industries, diplomats and civil servants, that the Central Bank of Nigeria should make the naira reflect the state of the market, by rethinking the CBN’s demand-management strategy.
His words: “As for the exchange rate, I think we need to move our rates to [be] as reflective of the market as possible. This, in my own respective view, is the only way to improve supply. We can’t get new dollars into the system, where the exchange rate is artificially low. And everyone knows by how much our reserves can grow. I’m convinced that the demand management strategy currently being adopted by the CBN needs a rethink, and that is just my view.”
Osinbajo’s Tuesday statement said he had been misunderstood.
In full, the State House Press Release, titled, “Why Osinbajo Advocates Forex Policy that Curbs Arbitrage and Corruption, Offering Nigerians Cheaper Dollars,” stated:
“Our attention has been drawn to statements and reports in the media mis-characterising as a call for devaluation, the view of Vice President Yemi Osinbajo, SAN that the Naira exchange rate was being kept artificially low.
“Prof. Osinbajo is not calling for the devaluation of the Naira.
“He has at all times argued against a willy-nilly devaluation of the Naira.
“For context, the Vice President’s point was that currently the Naira exchange rate benefits only those who are able to obtain the dollar at N410, some of who simply turn round and sell to the parallel market at N570. It is stopping this huge arbitrage of over N160 per dollar that the Vice President was talking about. Such a massive difference discourages doing proper business, when selling the dollar can bring in 40% profit!
“This was why the Vice President called for measures that would increase the supply of foreign exchange in the market rather than simply managing demand, which opens up irresistible opportunities for arbitrage and corruption.
“It is a well-known fact that foreign investors and exporters have been complaining that they could not bring foreign exchange in at N410 and then have to purchase foreign exchange in the parallel market at N570 to meet their various needs on account of unavailability of foreign exchange. Only a more market reflective exchange rate would ameliorate this. With an increase in the supply of dollars the rates will drop and the value of the Naira will improve.
“The real issue confronting the economy on this matter is how to improve the supply of foreign exchange, but this will not happen if we do not allow mechanisms like the Importers and Exporters window to work. If we allow this market mechanism to work as intended, we will find that the Naira will appreciate against the dollar as we restore confidence in the system.”