We have received this response from the Central Bank of Nigeria about a recent article in The Economist:
The attention of the Central Bank of Nigeria (CBN) has been drawn to your recent article titled “Toothpick Alert” in The Economist. First, the article seems to miss the fact that the exchange rate is simply a price that is essentially determined by the forces of supply and demand. The CBN believes that the 48% decline in oil prices may not be transitory and made bold policy changes including closure of the subsidised official foreign-exchange window, which resulted in a 22% depreciation in the currency, the Naira. As the Nigerian economy is heavily dependent on imports and the exchange rate pass-through to inflation is high, we believe that this adjustment is optimal at this time.
Contrary to the article’s argument, adjustments to a sharp decline in supply of American dollars cannot all be borne by an indeterminate depreciation, without considering the full impact on the Nigerian economy. The demand side also has to be considered, not just in response to the pressure on the Naira but as an opportunity to change the economy’s structure, resuscitate local manufacturing, and expand job creation...Continue reading
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