11 December 2014, Abuja – Governor, Central Bank of Nigeria (CBN), Mr. Godwin Emefiele has cautioned against panic decisions in response to the recent devaluation of the naira.
Meanwhile, the naira continued to fall against the dollar, as it depreciated by N1 against the dollar at the interbank market on Tuesday.
In response to apprehensions over the impact of the devaluation on prices of imported goods, Emefiele said, “There is cause yet for concern, but there is no need for panic”Speaking at the 48th Annual Bankers Dinner of the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos, Emefiele said the devaluation offers opportunity for local producers and Nigerians to embrace import substitution by patronizing locally produced goods.
He said, “The new value of the naira provides opportunity for entrepreneurs to replace costly imports with cheaper locally made goods.Let me reiterate that the current situation affords us the opportunity to embrace import substitution in Nigeria, thereby reducing the demand for foreign exchange by importers and ultimately conserve our hard earned foreign exchange .
“With the respect to this, the CBN is already collaborating with the Ministry of Industry, Trade and Investment as well as the Ministry of Agric and Rural Development as well as the National Youth Service Corp to aggressively begin the first phase of the import substitution programme that would take advantage of the current situation.Let me cease this opportunity to call on banks to partner with the federal in encouraging import substitution. It beats my imagination to understand why we cannot grow rice, produce milk and sugar in Nigeria. Before I was born, milk was being imported in Nigeria and total, it is still being imported.
“So, I ask, does it take rocket science to produce milk in this country? There is no reason for Nigeria to be facing the volatility we are facing today if we had embraced import substitution. The central bank will continue to provide resources to support entrepreneurs. Our recently launched N220 billion was meant to support entrepreneurs to support job creation and entrepreneurial development.”
Defending the decision to devalue the naira, Emefiele said, “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 defense of the currency and allowed the depreciation of the currency, but only after it was said to have spent over $90 billion in defending the currency over a couple of months.
“Without taking the monetary policy actions we took recently, the gains recorded in terms of price stability would be reversed.Therefore, the decision to raise the MPR is expected to increase capital flows into the country which would improve accretion to the reserves.The increase in CRR would reduce the amount of liquidity available for speculative activities and moderate the pressure in the forex market. Shifting the midpoint of the official exchange rate band would reduce the arbitrage tendency in the market and realign it with the rate at the interbank and BDC segments”.