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Naira is undervalued, says ex Minister

A former Minster of Finance, Dr.
Anthony Ani has decried the current
call for devaluation of the naira, saying
the currency is even undervalued.
Ani stated this at the induction
ceremony of the new members of the
Institute of Chartered Accountants of
Nigeria (ICAN), which took place in
Lagos last week.
Speaking on the topic: “Of Exchange
Rate Mechanism, Exchange Rate and
Devaluation”, Ani said President
Muhammadu Buhari should continue to
resist the pressure to devalue.
“There is nothing to gain from
devaluation since we do not export
anything significant except our crude
oil. Any devaluation will further worsen
our economic situation and will send
the cost of all our imported goods to
the skies. Already, our imports are the
most expensive in the world.
“Nigeria was removed from the
community of nations that adopts letter
of credit for its export business and as a
result no bank in Nigeria (not even our
CBN) can operate letters of credit. We
have to do this through correspondent
banks and this means paying for our
imports upfront with the attendant
commission, fees and interest charged
by the correspondent banks. A
devaluation in addition to the ban on
letter of credit will greatly increase the
cost of imported goods,” he said.
While saying that outbound money
transfer service should be stopped and
all remittances retained to stabilise the
exchange rate mechanism, the former
minister recommended that all the
excess liquidity in the banking system
arising from foreign exchange
operations should be mopped up and
retained by the Central Bank at zero
per cent interest. “This amount may be
used for development while being
retained by the CBN,” he added.
He also recommended that the CBN
must continue to play the central role
in the Autonomous Foreign Exchange
Market, stressing that the apex bank
“should fund the real sector of the
economy without exception for its
foreign exchange requirements. Any
prohibition should be done by tariff
adjustment. Commercial banks will
fund the other sectors.”
He said further that the CBN must
allow the Bureau De Change (BDG) to
operate on its own and must stop
funding them. All their deposits should
be returned to them.
According to him, Nigeria must find its
way back into the community of
nations operating letters of credit. A
situation where we operate through
correspondent banks makes our
imports to be expensive and have
adverse impact on the generality of
Nigerians.
Our motto should be production
production, production. We must repair
our refineries and produce all our
petroleum product needs. We must
produce our food requirements. We
must diversify our economy’’, he
said.Ani added that neither devaluation
nor flexibility of the exchange rate is
the answer to our problems.
Our exchange rate mechanism was
destroyed when we were cajoled into
debt cancellation programme. We must
restore this mechanism and adopt a
realistic exchange rate. We must make
the naira to be internally convertible
again; we must realise that the naira
had in the past been over-devalued
with no corresponding production or
productivity to follow. I hold the view
that Nigeria must not devalue and that
President Buhari is right in resisting
devaluation’’, he said

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