subject: CBN comfortable with current Naira rates -CBN Governor Sanusi [print this page] CBN comfortable with current Naira rates -CBN Governor Sanusi
March 4- CBN governor said that higher crude oil prices were making his job of managing the Nigerian economy "more difficult" as the government spends more on subsidiesonimported petroleum products. Nigeria imports 70% of its energy needs as it lacks adequate refining capacity. He also said the the CBN is satisfied with the current trading band of Naira of3% above or below 150. For such information about Nigeria, the place is (www.easykobo.com)
Common belief that Nigeria should gain from higher crude oil pricesand should boost its foreign reserves is not really true as Nigeria imports most of its refined petroleum products and the government then subsidises them incurring heavy spending leading to budget deficit. Higher oil prices also cause the prices of other products to rise adding to inflation in the country which is already high at 12.1%.An interest rate hike of 25 basis pointsin the benchmark lending rate is likely in March. Current rate is 6.5%. Bringing inflation below 10% is the target for CBN. Therefore monetary policy tightening is inevitable.
Speaking on Naira value, Sanusi said that CBN is "comfortable" with the band in which it trades. The aim is to keep Naira in a trading bad between 145.50 - 154.50 to the dollar. Last month the IMF advised CBN to devalue the Naira to protect Nigeria foreign reserves from depleting. The CBN governor rejected their advise calling it "internally inconsistent. The good sign for the Naira is that the foreign reserves rose by $700 million between January and February 2011.
However the foreign reserves have been steadily falling if one is to consider a longer time frame. The reasonis increased government spending and protecting Naira value. The CBN governor has publicly rebuked the politicians for excessive government spending and he has won public support for his efforts to clean Nigeria's banking system. He told Bloomberg that the politicians are finally listening to the CBN and that there was a new attitude in regard to fiscal consolidation in the government.
Naira is currently trading at 154.50/$1 at official rates, thats the full 3% above 150/$1 that the CBN likes. In parallel market, Naira is trading at N155.65/$1 according to some traders (mallams) who spoke to easykobo at 1PM in Lagos.
