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Buhari Bows To IMF Pressure, To Devalue Naira 290 To Dollar..


After months of insisting that he had no plans to devalue
the naira, President Muhammadu Buhari has caved to pressure to change
course.

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 devalues the Nigerian currency.

Sahara Reporters 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 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.

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