After months of insisting that he had no plans to devalue the naira, President Muhammadu Buhari has caved to pressure to change course, SaharaReporters has learned from an exclusive briefing by a few top aides of the president.
A day after the Buhari administration increased the price of the pump price of fuel by 67%, from N86.5 to N145 a liter, our sources disclosed that Mr. Buhari has also agreed to demands by the International Monetary Fund (IMF) that he significantly devalue the Nigerian currency. Our sources indicated that the naira would be pegged at N290 to one dollar. The current official rate is about N200 to a dollar.
Our sources said Mr. Buhari and his economic team took the decision to accept the IMF’s terms for funds that the Nigerian government wants to access in order to bridge a critical shortfall in revenue occasioned by a drastic decline in oil revenues. An administration insider told SaharaReporters that Nigeria could receive as much as $3 billion in credit facilities from the IMF.
“The truth is that Nigeria cannot operate without sourcing credit from the IMF,” said one of our sources, an economic adviser to Mr. Buhari, who spoke on condition of anonymity. “And the IMF was adamant that we must devalue before they can discuss extending credit to us,” he added.
Curiously, administration officials took the decision to devalue the naira without the input of the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, another source revealed. An official of the CBN confirmed to Saharareporters that bank executives were kept in the dark about the discussions that led to the Buhari administration’s decision to devalue the naira. “Some of us here [the CBN] are not opposed to devaluation, given our country’s present circumstances,” the source said, adding that it was the CBN’s function to pilot Nigeria’s monetary policies.
One of our sources pointed to the fact that the naira has been weakened in the parallel market, where it now sells at N360 per dollar. “The government cannot continue to operate under the illusion that the naira is stronger than it is. The only problem is that we did not start early enough to admit to Nigerians how bad the financial outlook was,” the source added.
The Nigerian economy has been pummeled by falling oil earnings that have led to a near collapse of the economy. The IMF had long indicated its readiness to support Nigeria’s economy with credit liquidity but insisted on Nigeria devaluing its currency. President Buhari had insisted on numerous occasions, before and after his election, that he would never devalue the naira.
It is unclear how Mr. Buhari and members of his economic team plan to justify the about-turn on devaluation and other policy somersaults. After initially vowing to reduce the price of fuel, the government yesterday announced a significant hike in fuel price. The administration also set to announce a 10% increase in value-added tax (VAT), another indication that the Buhari government was embracing the kind of liberalization pushed by the IMF.
To compound dwindling oil prices, militants in the oil-rich Niger Delta region have crippled oil exports substantially after bombing oil pipelines and issuing threats to oil companies to leave the region.
Last week, several oil companies evacuated essential staff from the region’s offshore platform leading to a reduction in daily oil outputs from 2.2 million barrels a day to 1.3 million barrels a day.