Central Bank of Nigeria, CBN will resist pressure to devalue the naira since it retains ample funds to defend the currency, its spokesman, Ugochukwu Okoroafor has said.
Naira has fallen in recent months, trading outside the CBN’s target band of 150-160 naira to the U.S. dollar since June, initially due to foreign investors booking profits on their naira assets, and on importers buying dollars.
CBN’s spokesman, Okoroafor said by telephone to Reuters that the institution remained committed to the band.
“We have the resources to meet demand. We are still determined to keep within that band,” he said on Monday.
But a similar naira weakness, partly caused by excessive spending prior to 2011 national elections, forced the central bank to lower the target band from 145-155 naira to the dollar in November that year, after months of struggling to prop it up.
Pressure on the currency of Africa’s second biggest economy will worsen next year as elections loom again in 2015 - traditionally at a time when government expenditure becomes very loose, pumping excess liquidity into the banking system.
The unit has hovered around the 162-163 level in recent months, on strong demand for dollars. It touched a 20-month low of 163.70 naira to the dollar last week.
It closed at 163.10 naira to the dollar on Monday, after it became clear the central bank would not intervene again to prop it up. By 0910 GMT on Tuesday it had rebounded to 162.90.
“We believe that the probability of (moving the trading band) is slim in the coming months,” said Gaimin Nonyane, an economist at Ecobank, adding that the bank had ample funds.
“Such a move would increase inflationary pressures. Given the Central Bank’s commitment to promoting price stability, we think the current rate will be maintained.”
Central Bank governor Lamido Sanusi has repeatedly warned that excessive election spending poses an inflation risk that he is ready to counter with tight monetary policy.
Showing posts with label Naira. Show all posts
Showing posts with label Naira. Show all posts
Wednesday, 4 September 2013
Tuesday, 3 September 2013
CBN to resist pressure to devalue naira
The Central Bank of Nigeria, yesterday, said it will resist pressure to devalue the naira since it retains ample funds to defend the currency.
Mr. Ugochukwu Okoroafor, CBN spokesperson said the apex bank Governor is expected to stay the course until his term is up in 10 months.
The naira has fallen in recent months, trading outside the CBN’s target band of 150-160 naira to the U.S. dollar since June, initially due to foreign investors booking profits on their naira assets, and on importers buying dollars.
Okoroafor said by telephone that the institution remained committed to the band. "We have the resources to meet demand. We are still determined to keep within that band," he CBN Deputy Governor, Kingsley Moghalu also said there were no plans to change the band in an interview with Reuters in London on Tuesday.
"We are comfortable with the band as it is currently - we do not have any intention of doing anything spectacular," he said.
But a similar naira weakness, partly caused by excessive spending prior to 2011 national elections, forced the central bank to lower the target band from 145-155 naira to the dollar in November that year, after months of struggling to prop it up.
Pressure on the currency will worsen next year as elections loom again in 2015 - traditionally at a time when government expenditure becomes very loose, pumping excess liquidity into the banking system.
"It's the case all over the world - governments tend to spend a lot leading up to elections," Moghalu said.
The unit has hovered around the 162-163 level in recent months, on strong demand for dollars. It touched a 20-month low of 163.70 naira to the dollar last week.
It closed at 163.10 naira to the dollar on Monday, after it became clear the central bank would not intervene again to prop it up. By 0910 GMT on Tuesday it had rebounded to 162.90.
"We believe that the probability of (moving the trading band) is slim in the coming months," said Gaimin Nonyane, an economist at Ecobank, adding that the bank had ample funds.
"Such a move would ... increase inflationary pressures. Given the central bank's commitment to promoting price ... stability, we think the current rate ... will be maintained."
Nigeria's consumer inflation ticked up to 8.7 percent in July, though Moghalu said he expected it to stay in single digits this year.
Central bank governor Lamido Sanusi has repeatedly warned that excessive election spending poses an inflation risk that he is ready to counter with tight monetary policy.
Analysts expect Sanusi will stick to that path until his planned departure next July when his five-year term expires. RISKS OF DEVALUING
"The central bank will continue to defend exchange rate stability ... as long as governor Sanusi remains in charge," said Standard Bank's Samir Gadio.
Sanusi has spent billions of dollars of foreign reserves over the past months in keeping the naira, which has lost 4.6 percent since the year, within its target corridor.
But Nigerian foreign exchange reserves stood at $46.85 billion by Aug. 29, down only 0.23 percent month-on-month from July, so they are not being rapidly depleted.
"Nothing about the central bank's recent guidance or behaviour suggests that is about to allow a devaluation of the naira," said Alan Cameron, economist at CSL Stockbrokers.
The bank tightened liquidity significantly in July, slapping a 50 percent reserve requirement on public sector deposits, up from 12 percent previously. That sucked 1 trillion naira out of the banking system and although the effect on the naira was shortlived, it showed the lengths to which the bank will go.
Moghalu said, however, that the purpose of the reserve requirement hike was to encourage banks to lend more, rather than to boost the currency.
"We would like to see more real economy lending and an expansion of the deposit base, and higher deposit rates, so that people can save," he said.
Another factor, said Charles Robertson, economist at Renaissance Capital, was that pressure on emerging market currencies generally could subside in the coming weeks, so the naira may start to recover all by itself.
"We are comfortable," said Moghalu. "The naira has appreciated a bit in recent days."
Mr. Ugochukwu Okoroafor, CBN spokesperson said the apex bank Governor is expected to stay the course until his term is up in 10 months.
The naira has fallen in recent months, trading outside the CBN’s target band of 150-160 naira to the U.S. dollar since June, initially due to foreign investors booking profits on their naira assets, and on importers buying dollars.
Okoroafor said by telephone that the institution remained committed to the band. "We have the resources to meet demand. We are still determined to keep within that band," he CBN Deputy Governor, Kingsley Moghalu also said there were no plans to change the band in an interview with Reuters in London on Tuesday.
"We are comfortable with the band as it is currently - we do not have any intention of doing anything spectacular," he said.
But a similar naira weakness, partly caused by excessive spending prior to 2011 national elections, forced the central bank to lower the target band from 145-155 naira to the dollar in November that year, after months of struggling to prop it up.
Pressure on the currency will worsen next year as elections loom again in 2015 - traditionally at a time when government expenditure becomes very loose, pumping excess liquidity into the banking system.
"It's the case all over the world - governments tend to spend a lot leading up to elections," Moghalu said.
The unit has hovered around the 162-163 level in recent months, on strong demand for dollars. It touched a 20-month low of 163.70 naira to the dollar last week.
It closed at 163.10 naira to the dollar on Monday, after it became clear the central bank would not intervene again to prop it up. By 0910 GMT on Tuesday it had rebounded to 162.90.
"We believe that the probability of (moving the trading band) is slim in the coming months," said Gaimin Nonyane, an economist at Ecobank, adding that the bank had ample funds.
"Such a move would ... increase inflationary pressures. Given the central bank's commitment to promoting price ... stability, we think the current rate ... will be maintained."
Nigeria's consumer inflation ticked up to 8.7 percent in July, though Moghalu said he expected it to stay in single digits this year.
Central bank governor Lamido Sanusi has repeatedly warned that excessive election spending poses an inflation risk that he is ready to counter with tight monetary policy.
Analysts expect Sanusi will stick to that path until his planned departure next July when his five-year term expires. RISKS OF DEVALUING
"The central bank will continue to defend exchange rate stability ... as long as governor Sanusi remains in charge," said Standard Bank's Samir Gadio.
Sanusi has spent billions of dollars of foreign reserves over the past months in keeping the naira, which has lost 4.6 percent since the year, within its target corridor.
But Nigerian foreign exchange reserves stood at $46.85 billion by Aug. 29, down only 0.23 percent month-on-month from July, so they are not being rapidly depleted.
"Nothing about the central bank's recent guidance or behaviour suggests that is about to allow a devaluation of the naira," said Alan Cameron, economist at CSL Stockbrokers.
The bank tightened liquidity significantly in July, slapping a 50 percent reserve requirement on public sector deposits, up from 12 percent previously. That sucked 1 trillion naira out of the banking system and although the effect on the naira was shortlived, it showed the lengths to which the bank will go.
Moghalu said, however, that the purpose of the reserve requirement hike was to encourage banks to lend more, rather than to boost the currency.
"We would like to see more real economy lending and an expansion of the deposit base, and higher deposit rates, so that people can save," he said.
Another factor, said Charles Robertson, economist at Renaissance Capital, was that pressure on emerging market currencies generally could subside in the coming weeks, so the naira may start to recover all by itself.
"We are comfortable," said Moghalu. "The naira has appreciated a bit in recent days."
Wednesday, 17 July 2013
Interest rates cannot crash to single digit - CBN Gov
By Emman Ovuakporie and Levinus Nwagbuhiogu
ABUJA- GOVERNOR of the Central Bank of Nigeria, CBN Mallam Sanusi Lamido Sanusi has said there is need to re-visit the re-designing of the Naira to shore up the Nigerian economy.
Also, the CBN Governor said the Excess Crude Account is down by $7billion because of our high dependence on imports.
He also noted that interest rates in Nigeria cannot crash to a single digit because inflationary rate as at last month was 8.4percent.
Sanusi who made this disclosure at a meeting organised by the House committee on Banking and Currency said:
"It is a rare occurrence for counterfeits to be dispensed by ATM machines because the notes are processed.
"One of the reasons we wanted to have a restructuring of the redesign of the currency a few months ago was because as explained, many of our notes had been in existence for upward of eight or even ten years.
"Now best practice is that within a period of five to eight years you redesign the currency because after that period counterfeiters tend to catch up.
[caption id="attachment_332115" align="alignnone" width="412"]
CBN Gov Lamido Sanusi[/caption]
Sanusi explained further that "even at that, Nigerian notes in terms of what we see as counterfeit and processing, the percentage is very low.
"We had about 3.9 notes from a million notes 2007, 6 in a million notes in 2008, 8.4 pieces in one million in 2009, 7.4 pieces in 2010, 5.4 pieces in a million notes in 2011 and 8.4 pieces in 2012 of the notes processed were counterfeit.
"But with ATM machines it should not have happened because it has been processed and we would be very pleased to know if there are specifics about any bank so that we can draw their attention on the importance of processing them before putting them in ATM machines."
"Now unfortunately the redesign suffered because of all the noise around N5,000 and therefore it is been delayed because that is what would have made it impossible for counterfeiters to cock so till they have to wait for another 5,6, 7 years before they learn how to counterfeit by which point , the CBN should be redesigning the notes again.
"So I suppose that at some point the country would have to revisit the issue of redesigning the notes but at the moment based on popular demands, we have had to step down the redesign."
On interest rates, delivering a low rate of interest is the easiest thing for us to do because the CBN prints money and interest rates come down when you have a lot of money and that is not a problem.
ABUJA- GOVERNOR of the Central Bank of Nigeria, CBN Mallam Sanusi Lamido Sanusi has said there is need to re-visit the re-designing of the Naira to shore up the Nigerian economy.
Also, the CBN Governor said the Excess Crude Account is down by $7billion because of our high dependence on imports.
He also noted that interest rates in Nigeria cannot crash to a single digit because inflationary rate as at last month was 8.4percent.
Sanusi who made this disclosure at a meeting organised by the House committee on Banking and Currency said:
"It is a rare occurrence for counterfeits to be dispensed by ATM machines because the notes are processed.
"One of the reasons we wanted to have a restructuring of the redesign of the currency a few months ago was because as explained, many of our notes had been in existence for upward of eight or even ten years.
"Now best practice is that within a period of five to eight years you redesign the currency because after that period counterfeiters tend to catch up.
[caption id="attachment_332115" align="alignnone" width="412"]
CBN Gov Lamido Sanusi[/caption]Sanusi explained further that "even at that, Nigerian notes in terms of what we see as counterfeit and processing, the percentage is very low.
"We had about 3.9 notes from a million notes 2007, 6 in a million notes in 2008, 8.4 pieces in one million in 2009, 7.4 pieces in 2010, 5.4 pieces in a million notes in 2011 and 8.4 pieces in 2012 of the notes processed were counterfeit.
"But with ATM machines it should not have happened because it has been processed and we would be very pleased to know if there are specifics about any bank so that we can draw their attention on the importance of processing them before putting them in ATM machines."
"Now unfortunately the redesign suffered because of all the noise around N5,000 and therefore it is been delayed because that is what would have made it impossible for counterfeiters to cock so till they have to wait for another 5,6, 7 years before they learn how to counterfeit by which point , the CBN should be redesigning the notes again.
"So I suppose that at some point the country would have to revisit the issue of redesigning the notes but at the moment based on popular demands, we have had to step down the redesign."
On interest rates, delivering a low rate of interest is the easiest thing for us to do because the CBN prints money and interest rates come down when you have a lot of money and that is not a problem.
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