Do not Devalue the Naira On 2020 Budget - Experts


According to economic experts have expressed concerns about the recent devaluation of the Naira by the Central Bank of Nigeria (CBN), warning that it will make the 2020 budget unrealistic and unachievable.

Devaluation the Naira from 360/$1 to N380.5/$1 at the official market is part of efforts by the CBN to unify the exchange rates in the Importers and Exporters (I&E) window, a move the experts say has both merits and demerits.

Uche Uwaleke, Professor of Finance and Capital market, noted that currency devaluation makes the 2020 budget unrealistic and unachievable since it was based on exchange rate of N360 per dollar and by extension the recently-approved Medium Term Expenditure Framework.
“The immediate implication is increased cost of importing petroleum products which will lead to a hike in the pump price of fuel especially now that the downstream sector is being deregulated,” he added

If the monetary policy is tightened, according to him, it would help rein in inflation expectations, fur-ther widen the income gap, depress aggregate demand and adversely affect credit delivery to the private sector.

Further analysis from Stephen Kanabe agreed with the position of Uwaleke who expressed fear that tightening may also result in deposit money banks re-pricing their assets and loans, thus raising the cost of borrowing and therefore heightening the already weak investment climate.
The Monetary Policy Committee of the Central Bank had restated its commitment to maintaining sta-bility in prices, without which meaningful economic recovery cannot be achieved.

On his part, economic analyst, Seye Adetunmbi, noted that the action of the CBN became inevitable due to the reality of the pressure on the national reserve towards meeting the federal balance of trade obligations.

“Nigeria is no longer the net exporter of refined petroleum products as it used to be in the 1980s,” a situation he said now exacts pressure on the Naira.
However, the experts agreed that the devaluation also came with positive potentials for the economy.
The economic experts said it was important to ensure that while leveraging the upsides of exchange rates' unification, policy makers in Nigeria should ensure that the downside risks are mitigated.

Their advice is that the authorities should develop multiple sources of foreign Exchange outside oil, especially via Agriculture and Solid minerals, while vigorously promoting the use of domestic products and services by supporting their availability at competitive prices.

Economy , National News , 2020 , Cbn , Budget