On Monday, CBN Governor,Mallam Lamido Sanusi responded to call for devaluation of the Naira by the International Monetary Fund (IMF), saying the naira is not overvalued

Sanusin said he he did not believe the naira NGN=D1 was overvalued and that the advice was based on flawed logic.

After ending consultations with Nigeria three weeks days ago, the International Monetary Fund noted in a statement that foreign reserves had been falling and said speculation against the naira could become “intense”

The Fund said its staff believed the naira, which has traded in a narrow band around 150 to the U.S. dollar for more than a year, was overvalued and that greater flexibility would cushion external shocks to the Nigeria’ economy.

“We do not believe that the naira is overvalued. We do not believe that at a time when the oil price is going up and output is going up we should be losing the value of our currency,” Sanusi told CNBC Africa television.

“We also do not think that it makes sense, if the IMF is concerned about inflation, to ask a country that is import dependent to devalue its currency… So the advice given by the IMF, frankly, is not based on sound economic logic.”

Sanusi, who told Reuters in January he was convinced a stable exchange rate was crucial for maintaining price stability and attracting foreign investment, said the IMF had gone ahead and published its advice without giving Nigeria’s position.

He said he agreed with the Fund’s assessment that further monetary tightening may be required if inflationary pressures continue, but said it was “naive” to believe that monetary policy alone could rein in rising prices.

He noted that expansion in credit to the private sector had remained weak despite an accommodative monetary policy.

“The link between monetary policy and inflation is at best tenuous, it is theoretical. The reality is that the bulk of inflation is being pushed by structural forces,” Sanusi said.

“So we do agree that we should tighten, but we think the IMF is a bit naive in its overestimation of the potency of monetary variables in the short term,” he said.