Nigeria denies report of plan to devalue naira

Reports say President Muhammad Buhari agreed to devalue the naira in exchange for IMF funds.

FILE: Nigerian President Muhammadu Buhari addresses delegates at the start of a conference to tackle corruption at the Commonwealth Secretariat in London on 11 May, 2016. Picture: AFP.

ABUJA/WASHINGTON - Nigeria's central bank denied a report that it planned to devalue the naira, while the International Monetary Fund (IMF) reiterated that Nigeria would benefit from a more flexible exchange rate but said no request for funds had been made.

Talk of a devaluation has been rife since Vice President Yemi Osinbajo said on Wednesday the central bank needed to change its foreign currency policies to spur investment.

Hours earlier, Nigeria had cut petrol subsidies, lifting pump prices by up to 67 percent, a move the IMF usually insists on before releasing funding.

News website said President Muhammad Buhari had agreed to devalue the naira in exchange for IMF funds to help offset a slump in oil revenues.

Quoting unnamed Buhari aides, the report said the naira rate to the dollar could fall to 290 from roughly 200.

"The rumour that the naira is going to be devalued is false," central bank spokesman, Isaac Okoroafor, said late on Saturday when asked about the report.

An IMF spokesperson said Nigeria had not approached the fund for funds but reiterated that a more flexible exchange rate would support "the competitiveness of the economy".

"And so, there are no negotiations going on," the spokesperson said. "However, as we have said before, the Fund continues to have a productive dialogue with the authorities and we stand ready to help should the country make a request."

Nigeria has held talks with China, the World Bank and African Development Bank for loans to help fund its record $30 billion budget for 2016 but Finance Minister Kemi Adeosun said in January the oil producer was not seeking any emergency loans.

Buhari has resisted calls by the IMF for a devaluation.

But British Foreign Minister Philip Hammond said Nigeria had de-facto partially devalued the naira by allowing fuel importers to buy dollars on the black market last week. The naira trades at about 40 percent below the official rate on the black market.

"The exchange rate applicable to oil imports effectively recognises that there is an imbalance in the official rate," he said.

"Maybe they'll take the logic of how this goes and move further," Hammond told reporters before meeting Buhari in Abuja late on Saturday, without elaborating.

On Wednesday, Osinbajo said Nigeria needed a "substantial" review of its exchange policies and would see very soon a more flexible approach. Asked whether the naira should be devalued, he said that "there is an ongoing debate".

The central bank has imposed hard currency curbs and frozen the naira rate to the dollar, which has hit investment as foreign firms expect Nigeria to devalue the currency anyway at some point due to a slump in oil revenues.

"Exchange restrictions are costly and distortionary; at best, they could be temporary, but should be removed," the IMF spokesperson said in an emailed in response to questions.