DEVALUATION OF NAIRA IS NOT AN OPTION – EMEFIELE

Incoming central bank Governor Godwin Emefiele said a devaluation of the naira would be “devastating” for the economy.

The Central Bank of Nigeria’s exchange-rate policy is correct and the regulator needs to ensure Africa’s largest oil producer has a strong currency, Emefiele said in his first public comments since being nominated by President Goodluck Jonathan to the position.

“This is an import dependent economy,” Emefiele, 52, told a Senate hearing today in the capital, Abuja, before the upper house of parliament approved his appointment. “Devaluation is not an option.”

Emefiele, chief executive officer of Zenith Bank Plc, will succeed Lamido Sanusi, 52, whose suspension by Jonathan last month prompted the currency to drop to a record low as investors worried that the independence of the central bank will be compromised. That increased speculation policy makers will devalue the currency by lowering the midpoint of the naira peg from 155 per dollar in the face of dwindling foreign-currency reserves.

Nigeria’s reserves have declined 13 percent this year to $37.9 billion as of March 24. The naira has dropped 2.8 percent against the dollar on the interbank market in the period.

The decline in foreign-exchange reserves is due to a “speculative attack,” Emefiele said.

Emefiele will need to control inflation and steer the economy of Africa’s most populous nation through next year’s presidential election amid pressure to boost government spending, bolster the currency and convince investors of the independence of the central bank.

In its first meeting since Sanusi’s departure, the Monetary Policy Committee, led by acting GovernorSarah Alade, yesterday held its key interest rate at a record 12 percent and increased the cash reserve requirements on private sector deposits to 15 percent from 12 percent, citing the continued need for a tight monetary stance.

Jonathan suspended Sanusi for “financial recklessness and misconduct,” allegations he denied. His removal came after he alleged that billions of dollars of government oil revenue were unaccounted for.

A banker with 26 years of experience, Emefiele became the managing director of Zenith Bank, Nigeria’s second-largest lender by assets, in August 2010 after serving as deputy managing director from 2001.

He has a MBA degree from the University of Nigeria in Nsukka and lectured at the University of Port Harcourt, the institution where Jonathan taught before he entered politics.

Source | Bloomberg

CBN SUBMITS 2014 BUDGET TO NATIONAL ASSEMBLY FOR 1ST TIME IN 5 YEARS

The Central Bank of Nigeria (CBN) yesterday defended its 2014 budget proposal before the House of Representatives Committee on Banking and Finance, the first of such an exercise in about five years.

Under Mallam Sanusi Lamido Sanusi, the suspended CBN governor, the central bank had invoked its independence, as documented in the Banking and Other Financial Institutions Act (BOFIA) and the CBN Act, as a reason for it not to subject itself to the budget defence at the National Assembly. ‎

This is just as the Speaker of the House of Representatives, Hon. Aminu Waziri Tambuwal, ordered  all committees yet to complete their 2014 budget defence reports before the Committee on Appropriation to ensure that they do so latest today.
Deputy Governor in charge of Corporate Services at the CBN, Alhaji Suleiman Barau, who defended the CBN’s 2014 budget, put the projected revenue for the fiscal year at N553 billion, with expected income and projected expenditure of N377.9 billion.

He also gave a picture of its last year’s budget performance, under which the bank superseded its target on expenditure by more than N326 ‎billion.
The central bank also budgeted‎ N413. 374 billion for the same purpose but ended up spending a staggering N739. 640 billion, Barau said.
He explained that the bulk of the 2013 excess expenditure was spent on “liquidity management”‎ in the economy.

Equally, the bank, according to him, earmarked N180 billion for‎ liquidity management‎ but spent N536.6 billion. In the same period, the total income that accrued to it stood at N600.53 billion.

Other details indicated interest on foreign investments (N80.175 billion); interest on domestic investments (N388.208 billion); interest on domestic loans and advances (N13.540 billion), and others N118.61 billion.
The banks staff strength currently stands at 6,661. ‎

Meanwhile, during a plenary session, Tambuwal read a communication from Hon John Enoh, Chairman of the Appropriation Committee, stating that committees should submit their defence reports today or face exclusion from the 2014 budget.

Source | ThisDay

MONETARY POLICY COMMITTEE MEETS TO DISCUSS FALLING RESERVES, NAIRA

The nation’s fast depleting external reserves and the persistent pressure on the naira will top the agenda as the Central Bank of Nigeria’s Monetary Policy Committee begins its two-day meeting today (Monday).

Being the first MPC meeting after the suspension of Mr. Lamido Sanusi as the CBN governor, the financial markets are edgy about the likely outcome of the meeting due to the present high level of uncertainty.

Today’s meeting will be the first to be chaired by acting Governor of the CBN, Mrs. Sarah Alade.

While analysts are divided over the possible devaluation of the naira, there is a consensus of opinion that the post-Sanusi MPC will continue the monetary tightening stance of the suspended governor.

They argued that the current economic situation in the country supported the need to tighten the monetary policy further.

The analysts also believed that Alade, who until her appointment was the deputy governor in charge of economic policy, had always voted in support of monetary tightening.

The Financial Derivatives Company Limited, in its latest economic report, predicted that the MPC would increase the Cash Reserve Requirement on public sector deposits to 100 per cent, up from 75 per cent.

The FDC report stated, “We anticipate two possible scenarios alongside the hike in the CRR. The first scenario is a shift in the exchange rate midpoint from N155 to N165/$, which is an estimated three to five per cent depreciation in the naira. The rationale for this is the increased volatility recorded at the interbank and parallel markets, and the CBN’s continued support of the naira at a cost to the external reserves.

“The premium between the official and parallel market remains wide at N16.26 compared to N8.25 in October 2013. Our second scenario is an increase in the MPR to 13 per cent per annum to tighten liquidity conditions in the money market.”