PMB Calls JP Morgan Bluff, Says No to Devaluation

President Muhammadu Buhari has ruled out possible devaluation of the naira currency in the near term, putting paid to speculations of an imminent relaxation of the current foreign exchange rule by the central bank.
JP Morgan has based its suspension on the fact that the central bank has adopted currency measures that were making transactions too complicated. JP Morgan was particularly irked that the CBN refused to officially sell dollars to importers of items like toothpick and other products readily available  in Nigeria.
Buhari said on Thursday in an interview with France 24 that he does not think the country’s currency, the naira, should be devalued again.
“I don’t think it is healthy for us to have the naira devalued further. 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,” Buhari said.
Nigeria’s central bank has imposed progressively tighter restrictions on access to foreign exchange in an effort to prop up the naira, which has been sliding since the slump in global crude prices last year. In June, it restricted access to foreign exchange for the import of 41 items ranging from rice and toothpicks to steel products and glass.
The central bank had introduced series of measures including directing commercial banks to pay for their dollar purchases 48 hours in advance, banned them from accepting foreign currency cash deposits and excluding about 41 items from access to official foreign exchange market in a bid curb dollar demand, stem illicit financial flows and conserve its foreign exchange reserves.
The US investment banker JP Morgan said last week it will remove Nigeria from its Government Bond Index (GBI-EM) by the end of October, after warning the government of Africa’s biggest economy that currency controls were making transactions too complicated.
The bank had warned Nigeria that to stay in the index, it would have to restore liquidity to its currency market in a way that allowed foreign investors tracking the index to conduct transactions with minimal hurdles.
The central bank had to devalue the naira and pegged it at a fixed rate against the dollar, turning trading into a one-way quote currency market whose lack of transparency upset investors and businesses.
Nigeria was included in the GBI‐EM in October 2012, but after the Central Bank of Nigeria (CBN) late last year introduced foreign-exchange trading restrictions to shore up a weak naira currency, JP Morgan placed the country on index watch in January 2015, saying that the capital control measures made it more difficult for foreign investors to replicate its indices.
Items restricted from getting foreign exchange officially include rice, cement, margarine, palm kernel/palm oil products/vegetable oil, meat and processed meat products, vegetable and processed vegetable products, poultry –chicken, eggs, turkey – private airplanes/jet, Indian Incense, tinned fish in sauce – Geisha/Sardines, cold roiled steel sheet and galvanised steel sheets.
Others are roofing sheets, wheel barrows, head pans, metal boxes and containers, enamelware, steel drums, steel pipes, wires, rods, wire mesh, steel nails, security and razor wire, wood particles boards and panels, wood fiber board and panels, plywood  boards and wooden doors.
In addition, sourcing of forex for the importation of toothpicks, glass and glassware, kitchen utensils, tables, textiles, woven fabrics, clothes, plastic and rubber products, soap and cosmetic, tomatoes/tomato paste and Eurobond/foreign currency bond/share purchase has been prohibited.

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