The Governor, Central Bank of Nigeria, Godwin Emefiele, has said that the bank had spent a huge chunk of the external reserves in defending the naira from falling, adding that the best thing to do is to devalue it.
This, he said, informed part of the reasons the central bank chose to devalue the naira about two weeks ago, rather than continue in the defence of the nation’s currency from the external reserves.
Emefiele, who spoke at the Bankers’ Dinner organised by the Chartered Institute of Bankers of Nigeria in Lagos on Saturday night, disclosed that the bank had spent a huge chunk of the external reserves in defending the naira from falling, adding that the best thing to do is to devalue it.
He said although the decision to devalue the national currency would come with pains, it would lead to benefits in the long run.
“The CBN took the decision that it would be sub-optimal to continue to heavily deplete the country’s reserves in defending the naira. This decision was appropriate because neither the central bank nor the federal government is in control of the major factors causing the depreciation of the nation’s currency.
“In fact, the Russian central bank has abandoned its defence of the currency and allowed the depreciation of the currency, but only after it was said to have spent over $90bn in defending the currency over a couple of months,” he said.
The CBN governor also noted that in recent time, Nigeria had faced a simultaneous dwindling supply of the dollar and rise in demand, adding that this had led to a rise in the price of the dollar at both the interbank and Bureau De Change segments of the market.
Emefiele claimed that the underlying factors that led to the dwindling supply of the dollar were mainly global and not country specific.
The factors which he said were beyond the CBN and the government included the fall in the global oil prices, the end of the United States Quantitative Easing programme and the global fall in the price of other export commodities apart from the crude oil.
The apex bank boss said the discovery of shale oil by the US had not also helped matters, adding that all these constituted low supply of the US dollars amid hi…gh demand for them.
