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Buhari Hints CBN Will Not Wait Long Before Devaluating Naira In 2016

The Central Bank of Nigeria (CBN) may devalue the naira next year after President Muhammadu Buhari hinted he would accept a devaluation of the national currency, spurring speculation it may take place early next year when the local market reopens for trading.

The CBN is fine-tuning the management of foreign exchange and would introduce some flexibility that would encourage additional inflows, Buhari told lawmakers in Abuja on Tuesday, December 22, as he presented Nigeria’s 2016 budget.

“I am aware of the problems many Nigerians currently have in accessing foreign exchange for their various purposes,” the president said.

“These are clearly due to the current inadequacies in the supply of foreign exchange.

naira

President Buhari delivering the 2016 budget

“We are carefully assessing our exchange-rate regime, keeping in mind our willingness to attract foreign investors, but at the same time managing and controlling inflation to a level that won’t harm average Nigerians.

“To the investors, business owners and industrialists, we are aware of your pain…

“To the farmers, traders and entrepreneurs, we also hear you. The status quo cannot continue,” Buhari said.

The naira has been fixed at N197-N199 to the US dollar since early March, with the CBN governor, Godwin Emefiele, curbing foreign-exchange trading and introducing import controls after the naira fell to a record low as crude oil prices plunged.

That has caused investors, including Aberdeen Asset Management Plc and Morgan Stanley, to sell naira bonds and stocks in anticipation of a devaluation.

The president’s change of tone means a devaluation and loosening of currency-trading restrictions may take place on January 4, when the CBN reopens the interbank market, which has been shut since December 18 for the Christmas / New Year holidays.

Razia Khan, the London-based head of Africa research at Standard Chartered Plc, predicts the naira will weaken to N220 per dollar in the first quarter and N228 by the end of 2016.

“There’s recognition that the current system isn’t working and they need to move to something better,” Khan said.

READ ALSO:  Investors Withdraw $500 Million From Nigeria

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