Nigeria's president says currency should not be devalued

folarin okunola

September 17, 2015 10:13 AM

Africa's top oil producer has been hit hard by the fall of global crude prices, and its central bank has imposed increasingly strict foreign exchange rules to save its reserves

President Muhammadu Buhari addresses members of the National Working Committee during the meeting of the All Progressives Congress (APC) party at the headquarters of the party in Abuja, Nigeria July 3, 2015. REUTERS/Afolabi Sotunde

Nigeria's currency should not be devalued further, President Muhammadu Buhari said on Wednesday, despite the central bank's growing struggles to keep the naira at current levels.

Africa's top oil producer has been hit hard by the fall of global crude prices, and its central bank has imposed increasingly strict foreign exchange rules to save its reserves and avoid what would be the third devaluation in a year.

The naira fell to as low as 242 per dollar on the parallel market in July, versus the official rate of 197. It has lost around 15 percent against the dollar over the past year with an official devaluation in November and a de facto one in February.

"I don't think it is healthy for us to have the naira devalued further," Buhari said in an interview with France 24.

"That's why we are getting the central bank to make modifications in terms of making foreign exchange available to essential services, industries, spare parts, essential raw materials and so on -- but things like toothpicks and rice, Nigeria can produce enough of those," he said.

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In June, the central bank restricted access to foreign exchange for the import of 41 items ranging from rice and toothpicks to steel products and glass.

The stringent restrictions have not gone down well with investors, who have called for a relaxation.

Last week JP Morgan said it would remove Africa's biggest economy from its influential emerging markets bond index by the end of October, citing a lack of liquidity and the central bank's currency restrictions.

Nigeria's foreign exchange reserves fell 3 percent to $30.69 billion by Sept. 14, from $31.63 billion a month earlier, central bank data showed on Wednesday. The reserves were down 22 percent from a year earlier.

The central bank ate up much of its reserves to support the local currency, selling dollars to bureau de change operators twice weekly in a bid to narrow the gap between the official and unofficial exchange rate. The bank cancelled the auctions in February.

folarin okunola