The Monetary Policy Committee of the Central
Bank of Nigeria on Tuesday ruled out further
devaluation of the naira and warned against
speculative trading in the currency, vowing that
it would do everything within its power to protect
it from further depreciation.
The Governor of the CBN, Mr. Godwin Emefiele,
stated this while addressing journalists shortly
after the two-day MPC meeting held at the
central bank’s headquarters in Abuja ended.
Emefiele said while the CBN would continue to
provide foreign exchange for Nigerians engaged
in legitimate business, it would not allow the
nation’s currency to come under speculative
attacks.
He said currently, the naira was appropriately
priced, adding that there was no need for
anybody to worry that there would be another
devaluation of the currency.
The governor, however, admitted that significant
pressure persisted in the foreign exchange
market during 2014, resulting in further
weakening of the naira across the three
segments of the markets.
For instance, he said the exchange rate at the
Retail Dutch Auction System-Spot opened at
N157.34 to the dollar (including one per cent
commission) and closed at N164.08,
representing a depreciation of N12.34 or 4.28
per cent.
The inter-bank selling rate, according to him,
opened at N165.7 per dollar and closed at N180,
representing a depreciation of N14.73 or 8.63
per cent in the period, while at the Bureau de
Change segment, the selling rate opened at N170
per dollar and closed at N191.50, representing a
depreciation of N21.50k or 12.64 per cent.
Emefiele said, “We have a responsibility in line
with our core mandate to defend the currency
and the exchange rate of the naira. What is
paramount is that the external reserves must be
defended, the exchange rate policy must be
defended.
“We will ensure that economic activities continue
to take place; anybody who needs foreign
exchange to transact business in the country will
be allowed to do so, but for legitimate purposes;
and we will not tolerate speculative attack on the
currency.
“At this time, the naira is appropriately priced
and that there is no need for anybody to worry
that there will be devaluation.”
When asked about his assessment of the
nation’s currency since the last devaluation in
November 2014, he said, “Our assessment since
devaluation remains positive, and I repeat; we
are monitoring the market and we will ensure
that all economic activities that take place in the
market are supported by the CBN from time to
time.”
The governor also faulted the JP Morgan index
report released last Friday, which placed Nigeria
on a negative watch for the next three to five
months because the country’s foreign exchange
and the bond market was illiquid.
But Emefiele rejected the assertion that the
market was illiquid, noting that the CBN took the
decision to reduce the net open position from
one per cent to zero per cent owing to the
volatility in the market.
He said, “We disagree with this assertion that the
market is not liquid. It is important to note that
first of all, by reducing the open position from
one to zero, it did not mean that there was no
trading. What we only insisted was that the
banks must close their position to zero because
of the volatility of the market during that period
on the exchange rate and not that we could not
allow banks to continue because we also
discovered certain uncomfortable tendencies in
the market, which portended that there was
speculative attack on the currency.
“We also made it very clear that we are
monitoring the market to the extent that the
interbank market will continue to support trading
activities of both Nigerians and foreign investors,
and that at any point when we discover that the
market is unable to absorb or provide the
liquidity that is needed, the CBN will come up
and intervene in the market to provide the
liquidity that is needed for legitimate
transactions.”
He added that due to the importance of the JP
Morgan index to the economy, the CBN would
engage the agency to provide it with facts and
figures to prove the level of Nigeria’s liquidity.
The governor added, “So, we are looking at it and
will be engaging the JP Morgan index team to
provide our numbers to prove the level of
liquidity and I am very optimistic that they will
see reasons with us.
“We are committed to remain on the index, we
will do everything possible to continue to remain
on the index, because we know the adverse
impact that exclusion from the index will cause
the country.”
On the key monetary policy indicators, the
governor said the MPC decided to leave them
unchanged at their current levels owing to the
fact that their impact had yet to crystallise on
the economy.
Punch.
No comments: