DEVELOPMENTS in the foreign exchange market are putting the Central
Bank of Nigeria under intense pressure to further devalue the naira.
The currency has been experiencing free fall since November 25, 2014
when the CBN Monetary Policy Committee devalued it by eight
per cent from 155 to 168 against the United States dollar.
Following Saturday's announcement of the postponement of the general
elections by six weeks, the naira on Monday plunged from 188 to 200
against the dollar.
The Bankers' Committee gave the hint of further devaluation on
Thursday just as the nation's External Reserves dropped by $1bn in 12
days.
The committee which comprises the Central Bank of Nigeria governor,
the deputy governors, chief executive officers of Deposit Money Banks
and other stakeholders, said the managers of the economy, including
the CBN, were currently seeking a new level to devalue the already
battered currency.
Members of the committee met for over three hours in Lagos to review
developments in the banking sector and the economy, among other
issues.
The meeting, which was chaired by the CBN Governor, Godwin Emefiele,
later appointed the Managing Director, Guaranty Trust Bank Plc,
Segun Agbaje; Managing Director, FCMB, Ladi Balogun; Managing
Director, CitiBank Nigeria, Omar Hafeez; and Director, Banking
Supervision, CBN, Tokunbo Martins, to brief the press on some of its
deliberations.
Agbaje said the currency was going through a period of ''price
discovery'' to determine a new level for the currency.
He said, ''where we are now is that oil prices are down. As a country,
we are trying to find what level the currency devalues to. There is no
central bank in the world that allows a free flow of its currency.
What you do is try to find a price discovery and find a rate at which
you can live with. I think we are going through that process in
Nigeria. That is why at the last MPC meeting, the CBN devalued and
also moved the midpoint of the naira. What you are seeing in the
interbank market is again some price discovery."
The GTBank boss explained that ''devaluation is not a curse'', adding
that some major currencies of the world had gone through the process
in recent times.
According to him, no nation allows free flow of its currency.
Agbaje said, "I think that on the issue of exchange rate, exchange
rates are very emotional things. The reality is that devaluation is
not a curse. The Norwegian Krone, which is one of the strongest
currencies, devalued by 13 per cent last year. I think about half way
through last year, the pound to the dollar was about 1.67; today, it
is barely 1.52. So, where we are today is that oil prices are down.
"The thing about price discovery is that rates would go up and rates
would come down. And so for those who chose to speculate, you run the
risk of actually losing money.
"So until we find what that rate is, which I believe in my own opinion
we are around there now, and I believe that the CBN is also going
through that price discovery, when they get there.
"Any country that has over $30bn in its reserves is able to defend its
currency at a realistic rate. So, I don't think we have a state of
chaos around. I told you about some very strong economies that have
gone through some devaluation; so, it is not a curse."
Agbaje also said that the CBN had no plans to change rules regarding
the operation of domiciliary accounts.
He said, "There will be no change in the operation of domiciliary
accounts. The CBN remains committed to the foreign exchange market.
There will be free flow of funds into and out of the domiciliary
accounts''.
The GTBank boss added that banks' exposure to the oil and gas sector
did not pose any challenge to the banking industry because the CBN had
already carried out a stress test on all the banks with oil prices at
$50 and $55 per barrel.
Balogun also told journalists that despite the fall in oil prices,
government revenues last year increased by N75bn.
Balogun, who added that about N150bn increase was being expected
this year, explained that owing to the structural challenges in the
economy, banks would support the government to diversify the
economy.
According to the FCMB boss, banks will ensure that loans are given
to Small and Medium-scale Enteprise operators and people in the
agricultural sector.
Hafeez, said due to the volatility in the foreign exchange market, the
CBN had said that it would continue to meet the liquidity needs of the
market, adding that Emefiele had said that the market did not need to
panic any longer.
Martins said despite the volatility in the foreign exchange market,
the country's banks were still sound, safe and strong.
She said the capital adequacy levels, liquidity ratios, profitability,
asset quality and other ratios of the banks were all above average and
the regulatory minimum.
On the banks' exposure to the oil and gas sector in the light of
falling oil prices, Martins said Nigerian banks had one of the highest
capital levels in the world, adding that they were safe should the
unexpected happen.
Emefiele told theCNBC Africaon Thursday that there was "no need to
panic" about a slide in the currency, after figures showed that the
bank had been burning through more than $110m a day in an attempt to
defend the naira.
"We are not in the best of times but there's no need to panic," he
said, ruling out an emergency Monetary Policy Committee meeting. He
stated that floating the currency was not an option.
Figures on the CBN website on Thursday showed that the foreign
exchange reserves fell to $33.4bn as of February 10, a drop of $1bn
over the previous 12 days as the CBN sold hard currency to defend
the naira.
Firstclassnewsline.net
The reserves stood at $34.4bn on January 27, 2015.
Meanwhile, reports on Thursday indicated that the naira was likely to
continue its fall next week as investors worry over the postponement
of the general elections by the Independent National Electoral
Commission and its impact on the economy and the country.
The naira hit a record low of 206.60 against the dollar on Thursday at
the interbank market, and dealers halted electronic trading for the
second consecutive day.
Dealers had halted trading on Wednesday when the naira hit 204 against
the dollar.
"Demand remains strong and unless we have large dollar inflows into
the market, the local currency will continue to be under pressure," a
dealer said.
The CBN has repeatedly sold dollars to support the local currency. It
has also been relying on the external reserves to defend the naira.
However, other African currencies like the Ghanaian cedi and Kenyan
shillings are expected to remain strong next week.
Firstclassnewsline.net
Bank of Nigeria under intense pressure to further devalue the naira.
The currency has been experiencing free fall since November 25, 2014
when the CBN Monetary Policy Committee devalued it by eight
per cent from 155 to 168 against the United States dollar.
Following Saturday's announcement of the postponement of the general
elections by six weeks, the naira on Monday plunged from 188 to 200
against the dollar.
The Bankers' Committee gave the hint of further devaluation on
Thursday just as the nation's External Reserves dropped by $1bn in 12
days.
The committee which comprises the Central Bank of Nigeria governor,
the deputy governors, chief executive officers of Deposit Money Banks
and other stakeholders, said the managers of the economy, including
the CBN, were currently seeking a new level to devalue the already
battered currency.
Members of the committee met for over three hours in Lagos to review
developments in the banking sector and the economy, among other
issues.
The meeting, which was chaired by the CBN Governor, Godwin Emefiele,
later appointed the Managing Director, Guaranty Trust Bank Plc,
Segun Agbaje; Managing Director, FCMB, Ladi Balogun; Managing
Director, CitiBank Nigeria, Omar Hafeez; and Director, Banking
Supervision, CBN, Tokunbo Martins, to brief the press on some of its
deliberations.
Agbaje said the currency was going through a period of ''price
discovery'' to determine a new level for the currency.
He said, ''where we are now is that oil prices are down. As a country,
we are trying to find what level the currency devalues to. There is no
central bank in the world that allows a free flow of its currency.
What you do is try to find a price discovery and find a rate at which
you can live with. I think we are going through that process in
Nigeria. That is why at the last MPC meeting, the CBN devalued and
also moved the midpoint of the naira. What you are seeing in the
interbank market is again some price discovery."
The GTBank boss explained that ''devaluation is not a curse'', adding
that some major currencies of the world had gone through the process
in recent times.
According to him, no nation allows free flow of its currency.
Agbaje said, "I think that on the issue of exchange rate, exchange
rates are very emotional things. The reality is that devaluation is
not a curse. The Norwegian Krone, which is one of the strongest
currencies, devalued by 13 per cent last year. I think about half way
through last year, the pound to the dollar was about 1.67; today, it
is barely 1.52. So, where we are today is that oil prices are down.
"The thing about price discovery is that rates would go up and rates
would come down. And so for those who chose to speculate, you run the
risk of actually losing money.
"So until we find what that rate is, which I believe in my own opinion
we are around there now, and I believe that the CBN is also going
through that price discovery, when they get there.
"Any country that has over $30bn in its reserves is able to defend its
currency at a realistic rate. So, I don't think we have a state of
chaos around. I told you about some very strong economies that have
gone through some devaluation; so, it is not a curse."
Agbaje also said that the CBN had no plans to change rules regarding
the operation of domiciliary accounts.
He said, "There will be no change in the operation of domiciliary
accounts. The CBN remains committed to the foreign exchange market.
There will be free flow of funds into and out of the domiciliary
accounts''.
The GTBank boss added that banks' exposure to the oil and gas sector
did not pose any challenge to the banking industry because the CBN had
already carried out a stress test on all the banks with oil prices at
$50 and $55 per barrel.
Balogun also told journalists that despite the fall in oil prices,
government revenues last year increased by N75bn.
Balogun, who added that about N150bn increase was being expected
this year, explained that owing to the structural challenges in the
economy, banks would support the government to diversify the
economy.
According to the FCMB boss, banks will ensure that loans are given
to Small and Medium-scale Enteprise operators and people in the
agricultural sector.
Hafeez, said due to the volatility in the foreign exchange market, the
CBN had said that it would continue to meet the liquidity needs of the
market, adding that Emefiele had said that the market did not need to
panic any longer.
Martins said despite the volatility in the foreign exchange market,
the country's banks were still sound, safe and strong.
She said the capital adequacy levels, liquidity ratios, profitability,
asset quality and other ratios of the banks were all above average and
the regulatory minimum.
On the banks' exposure to the oil and gas sector in the light of
falling oil prices, Martins said Nigerian banks had one of the highest
capital levels in the world, adding that they were safe should the
unexpected happen.
Emefiele told theCNBC Africaon Thursday that there was "no need to
panic" about a slide in the currency, after figures showed that the
bank had been burning through more than $110m a day in an attempt to
defend the naira.
"We are not in the best of times but there's no need to panic," he
said, ruling out an emergency Monetary Policy Committee meeting. He
stated that floating the currency was not an option.
Figures on the CBN website on Thursday showed that the foreign
exchange reserves fell to $33.4bn as of February 10, a drop of $1bn
over the previous 12 days as the CBN sold hard currency to defend
the naira.
Firstclassnewsline.net
The reserves stood at $34.4bn on January 27, 2015.
Meanwhile, reports on Thursday indicated that the naira was likely to
continue its fall next week as investors worry over the postponement
of the general elections by the Independent National Electoral
Commission and its impact on the economy and the country.
The naira hit a record low of 206.60 against the dollar on Thursday at
the interbank market, and dealers halted electronic trading for the
second consecutive day.
Dealers had halted trading on Wednesday when the naira hit 204 against
the dollar.
"Demand remains strong and unless we have large dollar inflows into
the market, the local currency will continue to be under pressure," a
dealer said.
The CBN has repeatedly sold dollars to support the local currency. It
has also been relying on the external reserves to defend the naira.
However, other African currencies like the Ghanaian cedi and Kenyan
shillings are expected to remain strong next week.
Firstclassnewsline.net
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