Omodele Adigun
Former Governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, has warned the apex bank to back off its plan to unify the foreign exchange (forex) rates operated in the country.
According to him, the move, if not halted, would further batter the Naira as its unintended consequence.
The 14th Emir of Kano stated this at a recent virtual conference, entitled ‘Africa’s Debt: Freeze, Forgive, or Forget?’, hosted by AZA, Africa’s biggest non-bank currency broker.
In its transcript made available on an online platform, The Blast, Sanusi also kicked against spending cuts and raising taxes.
His words: “The Central Bank of Nigeria has said that it would move towards a convergence of the exchange rates. I don’t think there is much risk in Nigeria of not getting capital out. I think we will get to that convergence. And when we get to that convergence, there will be a devaluation. But that is a price we have to pay.”
On reducing spending, he noted: “In most African countries, you’ve got a fiscal deficit problem. You also have balance of payment problems. But this is not the time to look at how you can reduce the deficit, this is not the time for consolidation.”
He warned that “any attempt at cutting spending is going to throw many households into deeper poverty. You can’t increase taxes on the private sector heavily at this point because that is going to affect private investment and you’ll go into a self-fulfilling cycle of economic regress.”
Sanusi also shared his thoughts on debt relief for African countries sought by Prsident Muhammadu Buhari, among Other African leaders: “What is also clear is that we must do something about the level of debt service obligations. We must provide relief to the countries’ balance sheets to free up cash flow and maintain the momentum to go through this period. I think this is something that’s well understood. That’s what the IMF and World Bank have done, that’s what the DSSI is about, and private creditors also need to look at this.
I don’t think the countries are going to ask for a moratorium on private debt. But I know the African Union is looking at some instruments that will provide liquidity to the countries, while making sure that debt obligations have been met with private creditors.
“How did we get to this point? I spent most of my life in banking as a risk manager. I must say I am absolutely appalled by the kind of risk management that is shown by international creditors when lending to African countries.
It seems very easy to just invest in a bond if it’s giving a return of 10 or 11 per cent because you’ve got all these negative yielding instruments in the international markets and you’re relying on the fact that countries cannot afford to default.”