50 PERCENT DEVALUATION OF NAIRA WILL INDUCE PANIC – HENRY BOYO

January 25, 2016 – Renowned economists, Mr. Henry Boyo has warned the Federal Government against contemplating devaluation of the Naira, stressing that a 50 percent fall in value would severely deplete all Naira income values and induce panic among Naira income holders.

Boyo who has been very vocal on the economy wrote in his column in Monday Vanguard that any move to further devalue the Naira will force Nigerians to rise in defence of their income.

“Sadly, such response will simply instigate more Dollar demand in the open market”, he argued, stressing that ultimately, if Central Bank of Nigeria(CBN) is unable to restore public confidence to the Naira which is a store of value, another widening gap will once again evolve between official and parallel market exchange rates to make further serial Naira devaluation inevitable.

Citing an example of the Ghanaian CEDI, which he said followed a similar trajectory from 1 Cedi = $1 to eventually exchange for 10,000 Cedis before the redenomination of the currency in 2007, noted that the Ghanaian authority failed to control excess Cedi liquidity, adding that it is inevitable that the new Ghana Cedi now trades at about 40,000 old Cedis, that is 4 New Ghana Cedis to a dollar.

“Consequently in 2015, the IMF sadly had to provide for over $900m emergency loan so that Ghana could reduce the huge capital market deficit in Dollar supply and hopefully protect the Cedi exchange rate; regrettably, the end of the travails of the Ghanaian currency is still out of sight”, he said.

While appraising rent initiative by CBN, Boyo said its stranglehold monopoly on the forex market will invariably reduce the persistent, self-induced challenge of excess Naira liquidity, which he said overwhelms CBN’s regular auctions of dollar rations, “and the Naira exchange rate will become stronger”, he assured.