Nigeria’s vice president urges central bank to review FX management strategy

PUBLISHED: Tue, 12 Oct 2021 08:02:13 GMT
Felix Onuah
FILE PHOTO: Nigerian naira banknotes are seen in this picture illustration, September 10, 2018. Picture taken September 10, 2018. REUTERS/Afolabi Sotunde/Illustration/File Photo

ABUJA, Oct 11 (Reuters) – Nigeria’s central bank needs to review its foreign exchange management strategy and ensure that the naira’s valuation reflects market reality, Vice President Yemi Osinbajo said on Monday.

Nigeria has several exchange rates operating in parallel, a system put in place during a 2016 oil price crash because the government was seeking to avoid a large official devaluation of the naira as a matter of national pride.

Osinbajo urged the central bank to rethink its demand management policy, which it has used to restrict imports in an attempt to manage pressure on the currency.

“I think we need to move our rates to be as reflective of the market as possible. This… is the only way to improve supply (of dollars),” the vice president said.

He was speaking at a mid-term retreat of government ministers chaired by President Muhammadu Buhari.

Read more: Why Nigeria’s central bank won’t ease its grip on the naira

Osinbajo said the naira had since June been trading at 411 to the U.S. dollar on the official market, supported by the central bank, and at 565 naira on the black market, where it trades more freely.

“We can’t get new dollars into the system, where the exchange rate is artificially low,” he added.

A central bank official last month said the bank was worried about boosting dollar supply on the currency market and not valuation of the naira, adding that the level of the currency was expected to adjust based on demand. He said market failures had made the bank adopt a managed float regime.

Nigeria has been battling dollar shortages resulting from low prices for oil, its main export, and disruptions linked to COVID-19. The central bank has devalued the currency three times since March last year, but the naira has continued to weaken.

The local currency has hit new lows on the black market since the central bank in July banned dollar sales to bureau de change operators in a string of curbs on the currency market.

Sign Up for Our Newsletter Daily Update
Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent.
Get this delivered to your inbox, and more info about about our products and services. By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.