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CBN should adjust naira value quarterly – Chike-Obi

By on January 14, 2015

The Central Bank of Nigeria needs to adjust the value of the naira every quarter in order to mitigate the effect of inflation that can, among other things, make goods manufactured within the country not competitive.

The Managing Director, Asset Management Corporation of Nigeria, Mr. Mustafa Chike-Obi, who stated this, maintained that the recent devaluation of the naira by the CBN was a right step in the right direction.

He said the CBN’s action was not a ‘devaluation’ of the naira but a ‘readjustment’ of the naira value, an action he noted Nigeria needed to carry out every quarter being a high inflation country.

According to him, the CBN ought to have readjusted the naira beyond the eight per cent value it did.

Chike-Obi said, “I don’t believe the naira was devalued. I think the naira rate was adjusted properly, though a little bit less than I would have liked. I would have liked it to be readjusted much more than what was done. I would have preferred a higher adjustment. I don’t call it devaluation at all.

“If anybody was caught by surprise by that readjustment, I think they were not reading the times. The reserves were coming down and the CBN had been taking note of that.

“I have always maintained that the naira should be managed in a real term, and not nominal term. When you look at the N150 to one dollar,that is just a nominal term. I think it should be adjusted for inflation purpose. It will be proper to readjust it for inflation periodically; I would say every quarter. The naira-dollar should be readjusted for the purpose of inflation. When we adjust it, we would increase the nominal value of the naira against that inflation. As far as we are a high inflation country, we have to keep adjusting the naira value against the dollar.”

The AMCON boss said the only way the country could correct the high inflation was to increase its productivity.

He said, “The only way we can correct this inflation in currencies is to increase productivity. So until we are able to increase productivity and produce efficiently in this country, we will have to keep adjusting the naira. Once we can get that productivity right, the inflation will go off.”

He said he expected a further readjustment of the naira this year.

On the falling oil prices, Chike-Obi said the nation faced a tougher time this year but it could afford the nation another opportunity to diversify the economy.

He said, “I think one thing that we have not done well enough as a nation, and this goes back to about 20 or 30 years ago, is our failure to diversify the economy away from oil revenue. I think this gives us another chance to deal with the issue of diversification of our economy, industrialising the economy. That requires sacrifice, some investments and some courage.

“And all of these things coming into this environment will create some serious headaches. Everyone needs to make serious choices on how to spend, whether to invest it or spend it. So it is going to be a very challenging time yet it presents a better opportunity for Nigeria to move forward.”

 

[Punch]