Oil Crisis: Nigeria will do everything to remain in emerging market index — CBN

Godwin Emefiele, CBN governor

The Central Bank of Nigeria, CBN on Tuesday restated its commitment to defend the Naira and its exchange rate in line with core mandate and responsibilities.

The governor, Godwin Emefiele, said at the end of the two-day Monetary Policy Committee, MPC, meeting in Abuja that the bank would do everything to continue to support genuine business activities in key sectors of the economy.

The governor told reporters that the Committee had reviewed the performance of the economy since its last meeting in November 2014 and resolved that most of the decisions should be retained, as they needed to be allowed more time to impact the economy.

Consequently, he said the meeting decided to keep the monetary policy rate, MPR, at 13 per cent and the capital requirement ratios for private and public sectors deposits at 20 and 75 per cent respectively.

Though he said one member had voted for a symmetric corridor around the MPR, the Committee also decided to retain the liquidity ratio at 30 per cent.

Mr. Emefiele used the occasion to react to media reports that JP Morgan had announced on Friday last week that it might remove Nigeria from the emerging market indices on the ground that the country’s foreign exchange and the local bond market were not liquid enough.

He said the CBN would do everything within its mandate and capacity to keep Nigeria on the index to avoid the negative repercussions of placing Nigeria on a negative watch for the next three to five months.

“We are committed to remaining on the index,” Mr. Emefiele said. “We will do everything to remain on the index. We understand the enormity of the negative impact of being removed from the index.

When the issue was first reported, Mr. Emefiele said the CBN had disagreed, saying reducing the country’s open market position from one to zero did not mean there was no trading activities.

He said the CBN had insisted that banks must close their positions to zero due to the volatility in the market on exchange rate during that period, which showed certain tendencies in the market towards speculative attacks on the national currency.

He said a clear indication was given that the action was interim, as the CBN was monitoring the market pending the resumption of business in the New year.

After reviewing the market between December 17, 2014 and January 12, 2015, the CBN governor said the Committee of governors met and decided that the net open position be reviewed upwards to 0.1 per cent.

The CBN, he said would continue to review the liquidity level with the view the view to further review the net open position whenever necessary, particularly when illegal activities were found in the market.

“We are monitoring the bank to ensure that the interbank market would continue to support trading activities of both Nigerians and foreign investors,” the CBN governor said.

“If at any time it is discovered that the market is unable to absorb or provide the needed liquidity, the CBN would intervene in the market to provide the liquid needed for legitimate transactions to continue.”

He assured that the CBN would engage the JP Morgan with the numbers to prove the level of the country’s liquidity, adding that he important issue remained defence of the external reserve and exchange rate policy.

To ensure the economic activities of the people continued, he said the CBN would ensure that whoever needed foreign exchange to do legitimate business would be allowed to do so.

He warned that the CBN would not tolerate any speculative attack on the Naira.

On whether the CBN would consider further devaluation of the Naira if oil prices continue to fall. Mr. Emefiele said the issue would be subjected to regular reviews.

Assuring that the Naira at the moment was appropriately priced, the CBN governor said there was no need to worry about devaluation.

Our assessment of the economy since the devaluation of the Naira, he said the outlook remained positive, while the market would continue to be monitored to ensure that all economic activities were adequately supported.

On the widening gap between the official retail Dutch auction system, RDAS and the parallel market, Mr. Emefiele said the CBN was doing its best to bridge the gap by intervening in the market.

Allowing the gap, he said, would create opportunities that could be exploited by element determined to cause a situation where the exchange rate would spiral out of control.


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