Nigerian president says 'resolved' to keep naira steady, supports flexible FX policy

Central bank said it would shift to a flexible exchange rate policy to stop Nigeria sliding into recession.

Nigerian president-elect Muhammadu Buhari (R). Picture: AFP.

ABUJA - Nigerian President Muhammadu Buhari said on Sunday the government had resolved to keep the naira's exchange rate steady while supporting the central bank's decision to move away from the dollar peg, which is seen as overvaluing the naira.

Last week the central bank said it would shift to a more flexible exchange rate policy to stop Africa's biggest economy sliding into recession, but has yet to say exactly what the new policy is.

"We resolved to keep the Naira steady as, in the past, devaluation had done dreadful harm to the Nigerian economy," Buhari said in a speech marking his first anniversary in office.

Buhari got elected on a ticket to fix a country gripped by corruption and mismanagement, but his government has been grappling with the worst economic crisis for decades as low oil prices have whacked public finances and the naira.

A shortage of dollars and currency curbs imposed by the central bank has forced firms to shut down plants and lay off tens of thousands of people as they are unable to get dollars to import spare parts or goods to sell.

"I supported the monetary authority's decision to ensure alignment between monetary policy and fiscal policy," Buhari said. "We shall keep a close look on how the recent measures affect the naira and the economy."

"But we cannot get away from the fact that a strong currency is predicated on a strong economy," he said, reiterating his opposition to a devaluation.

The naira fell to 350 to the dollar on the parallel market this week after the central bank announced the policy change. It has kept the official rate at around 197.

Buhari also defended a decision to remove fuel subsidies and raise pump prices by up to 67 percent as "very painful" but necessary to adjust government spending to austerity.

"It is even more painful for me that a major producer of crude oil with four refineries that once exported refined products is today having to import all of its domestic needs," he said.

"This is what corruption and mismanagement has done to us and that is why we must fight these ills."

Buhari said the central Bank will offer more fiscal incentives firm with a local production to expand promote mining and farming and end reliance on oil.

But the 73-year-old told the nation of 188 million: "The measures we must take, may lead to hardships."