Buhari Rules out Devaluation of Naira

For the umpteenth time, President Muhammadu Buhari has rejected the devaluation of the naira.
The President reiterated his position yesterday that devaluation was not on the cards, despite the widening gap between official and parallel exchange rates of the naira to the dollar.

Buhari had at various times, frowned against the devaluation of the naira, insisting, on each occasion, that, “it is not  healthy for us to get the naira devalued.”

The President, who spoke at the Presidential Panel Roundtable on Investment and Growth Opportunities  in Sharm El-Sheikh, Egypt, said he rejected pressure to devalue the naira  because Nigeria does not have the competitive advantage to benefit from devaluation.
The value of the naira has continued to slide against the United States dollars at the parallel market, falling to N391/$ last Friday while the official rate is fixed at N197/$. In fact, the naira in the last one week fell significantly from N325/$ the previous Friday to N391/$ this last Friday.

Analysts  have divergent opinion on the solution to prevent further depreciation of the national currency, with some recommending devaluation while others suggested otherwise.

But in a statement issued by the Special Adviser to the President on Media and Publicity, Mr Femi Adesina, Buhari
argued that he won’t support devaluation of the naira because Nigeria could not compete with developed countries which produce to compete among themselves and could afford to devalue their local currencies.

“Developed countries are competing among themselves and when they devalue they compete better and manufacture and export more. But we are not competing and exporting but importing everything including toothpicks. So, why should we devalue our currency?” the president asked.

According to him, “We want to be more productive and self-sufficient in food and other basic things such as clothing. For our government, we like to encourage local production and efficiency.”
He added that those who had developed taste for foreign luxury goods should continue to pay for them rather than pressure government to devalue the naira.

Buhari, who expressed optimism that Nigeria would get out of its current economic downturn, noted that another major problem militating against economic revival was the huge resources deployed towards fighting insurgency and international terrorism.

He, however, commended the support being received from the international community in the administration’s fight against terrorism as well as cooperation in tracing looted funds stashed away in foreign countries.

Buhari said   the priority of his administration was to ensure national food security before export of food products.
According to him, Nigeria being a mono-economy, dependent on oil, and with a teeming unemployed youth population, the way out of the current slump in the global oil market, was for the administration to focus on agriculture and solid minerals development.
“The land is there and we need machinery inputs, fertilizer and insecticides,” he said.

Responding to a question on his performance since he assumed office, the president said his administration had been quite focused on three fundamental issues of securing the country, reviving the economy and stamping out corruption.
“The message on corruption has been driven home vividly and Nigerians are very acceptable to the message,” he said, adding that those accused of stealing public funds are cooperating by voluntarily providing useful information while investigations and prosecutions were ongoing.

However, power sector has continued to groan under the negative effect of the foreign exchange crunch. The operators have said their inability to access foreign exchange forex)  as a result of the Central Bank of Nigeria’s (CBN’s) policy, which restricts the use of forex, is  negatively impacting their operations.

Mainly generation companies (Gencos), they complained to thisday that their inability to buy required spare parts for routine maintenance of their plants, as well as the unknown economic direction of the government were beginning to weigh in on their operations.
The Chief Executive Officer of Transcorp Ughelli Power, Mr. Adeoye Fadeyibi, said due to the scarcity of forex, the firm was finding it difficult to meet the terms of their commitments and fulfill certain obligations

According to him, extant investment and expansion plans by the firm may have to be deferred until such a time federal government’s forex policy is favourable.

Fadeyebi noted that overall, the company was having it tough coping with the situation. He also added that it had resorted to complementing its operations with local capacities.

“I think it is a supply and demand issue. The volume of forex available is low and you will hear the banks talk about limits in forex and what it has done in terms of commitments from very serious investors like ourselves is that investments that we made that require payments are held up,” said Fadeyebi.

He added: “What we see is that the local banks are strained and unable to support us in terms of making sure that we are able to get the required forex to meet up with some of these commitments that have become obligatory.

“The problem is that with the crunch, it limits abilities to be able to meet obligations on time, that includes being able to meet payments on time, further invest without being strategic especially with the way the dollar is moving and then in terms of tariff which is pegged at N197 while the dollar is exchanging higher at the parallel market and for us there is no way we can trade outside of the interbank rates.”

“Overall, there is a huge effect and that is the simple truth. Without a doubt, if this continues, it is going to go from constraint to a complete halt and I mean in terms of ability to commit majorly without understanding the direction.

“However, in every bad situation, there is always a good side and that is that it fosters creativity and we need to at some point start to understand that the companies that will survive this crunch if it goes on longer are going to be companies that are able to leverage local capacity and then this will decide the destiny of companies that will stay on,” he explained.

“It is not affecting the tariff right now but it will very soon. The biggest impact right now is that even all the metering plans, apart from the meters that are already in the country, all other components have to be imported and there are no forex for importation of these things that the power sector needs to increase capacity,” said the source.

He further explained that, “discos cannot import transformers, Gencos, some of them cannot even import what they need and so the operational aspect of the sector is the one that is being affected which is that people cannot buy spare parts.”

According to him, “sooner than later, if this exchange rate changes, then there will be a bigger problem because most of the components in tariff are indexed on dollar. The problem will still come and it would have been nice that this new tariff will stop at the level that the National Assembly is crying about its recent increase because if the situation continues, the sector will find it very difficult to stay up.
“This sector has a lot of challenges going forward with the forex situation because either way, if you devalue the naira, the price of power will rise and if not, operators will not be able to maintain production because they cannot buy spare parts as it is the case now.”

Meanwhile, barely 19 days after Nigeria generated more than 5,000 megawatts (MW) of electricity in the history of her power sector, the country’s overall generation capacity which went down to 3,966MW last week has again picked up to 4,101.5MW.
The generation drop which was occasioned by disruptions in supply of fuel to gas power plants that are majorly in the south is, however, still down by 973.2MW.

Nigerian Gas Company (NGC), a gas transportation subsidiary  of Nigerian National Petroleum Corporation (NNPC), that supply of gas from two major gas plants at Utorogu and Oredo to link power plants has gone down considerably thus leading to generation drop.

The generation drop is even as operators in the country’s power sector – generation companies especially – are complaining about the impacts of the federal government’s foreign exchange rules on their operations.

According to the daily operational report from the Nigeria Electricity Systems Operator which is also referred to as the system operator, the country on Friday recorded a peak generation of  3966MW, cutting generation by 1108MW from the 5074MW that was generated on February 2.

The same report for Saturday however showed that there was a slight rise to 4101.5MW from the previous figure which means that the difference from the February generation mark is now 973.2MW.
After attaining a peak of 5074.7MW on February 2, 2016, power generation in the country lost 488.7MW within six days, dropping to 4,586MW on February 8.

Similarly, energy generation fell by 774.04MW within a week to 4,300.66MW, resulting in a reduction in the amount of energy sent out to electricity consumers, which was put at 4,212.32MW.

While confirming the reasons for the drop vis a vis, the issues with gas supply, the spokesman for the NNP
He said: “A process called pigging is going on and by March 9, the process should have been through but beyond C, Mr. Ohi Alegbe, told THISDAY that, “some maintenance is going on particularly at Oredo and Utorogu.” that is that there is also a hack into Escravos which would affect supply situation.