Despite a slump in the global economy as a result of the negative impact of the coronavirus pandemic, the Central bank of Nigeria (CBN) on Thursday insisted the time was not ripe for the call for the devaluation of the Naira.
Since the breakout of the deadly virus, the world economy, including that of the United States and Europe, has been unsettled, with most economic activities virtually grounded.
Crude oil prices at the international market have nosedived to unprecedented low levels.
In a few days, crude oil prices, which averaged $51.81 per barrel, declined close to $30 on a day the world now remembers generally as ‘Black Monday.”
With the Organisation of Petroleum Exporting Countries (OPEC) failing to reach a deal with its Non-OPEC allies last Friday on further production cut, the consequence could only be imagined.
The proposal by OPEC to cut output by another 1.5 million barrels per day in addition to the previous 2.1 million barrels per day was the group’s attempt to strengthen the market and boost the crude oil price.
But, the resistance by their allies, led by Russia, torpedoed the effort and exposed the market to the worst price decline since 2016.
Nigeria, which was already grappling with a low production capacity, is facing a different challenge, with oil price dropping by almost 50 per cent of the benchmark approved in the 2020 Federal Budget.
The prospect of a massive drop in oil revenue not only pushed the country’s economy into another tailspin but has led to pressures of a huge budget deficit and call for the devaluation of the Naira.
‘Time not ripe’
Regardless, the CBN in reaction to recent calls for the devaluation of the Naira in response to the current global economic challenge said the time was not ripe for such an intervention.
“The Central Bank of Nigeria wishes to note with displeasure, the rumours and speculative activities of unscrupulous players in the foreign exchange market, borne out of the impression that the CBN is on the verge of devaluing the Naira, and triggering panic in the FX Market,” the apex bank said in a statement by its spokesperson, Isaac Okorafor
“These rumours are false, unwarranted and calculated to serve their dubious and selfish ends,” Mr Okorafor added.
The CBN said it has commenced investigations in collaboration with the Nigerian Financial Intelligence Unit (NFIU) and related agencies to uncover the unscrupulous persons and FX dealers “behind the panic call”.
Further threats
The bank threatened to unleash the full weight of its rules and regulations against those behind the culprits, including, but not limited to, being charged for economic sabotage.
For nearly four years, Mr Okorafor said the CBN has maintained relative stability in all segments of the foreign exchange market.
The interventions, he noted, enabled investors, households and other economic agents to plan and to conduct their genuine foreign exchange transactions with relative ease.
He said the introduction of several foreign exchange management measures coupled with complementary interventions in food production and manufacturing drastically reduced food importation and removed the huge pressure on the foreign exchange market.
He said the outbreak of the coronavirus led to a global economic slowdown, fall in the price of crude oil, and less inflow of dollars into Nigeria, with the associated public health concerns leading to factory closures in China.
Also, he said, the fast-spreading virus also caused a substantial drop in imports, widespread travel restrictions around the world, and cancellation of many conferences, sporting events, business travels, and FX orders.
‘Yet no cause for alarm’
“The size of Nigeria’s foreign exchange reserves remains robust and comfortable, given the current realities of Nigeria’s genuine and legitimate FX demand.
“As such, the CBN remains able and willing to meet all genuine demand for foreign exchange for legitimate transactions,” the official said.
Mr Okorafor assured that the CBN was also working with the fiscal authorities to properly and accurately mention the immediate and expected impacts of the coronavirus in order to respond comprehensively.
He said despite the current circumstances and macroeconomic fundamentals, the CBN does not intend to devalue the Naira.
“The CBN will invoke the full weight of applicable sanctions on any persons and authorised dealers found to be involved in such disruptive and speculative market behaviour,” the CBN warned.
The deadly coronavirus, which started in December, from Wuhan, China has since spread to many countries across the world, leaving behind massive human and economic losses in its trail.
Over 4,000 people have died globally from the disease which has spread to over 100 countries.
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