Nigeria `Comfortable' With Naira Exchange Rate, Central Bank Governor Says
Central Bank of Nigeria Governor Sanusi Lamido Sanusi
Chris Ratcliffe/Bloomberg
Central Bank of Nigeria Governor Sanusi Lamido Sanusi speaks at the Investing in Emerging and Developing Markets conference at Chatham House in London.
Central Bank of Nigeria Governor Sanusi Lamido Sanusi speaks at the Investing in Emerging and Developing Markets conference at Chatham House in London. Photographer: Chris Ratcliffe/Bloomberg
July 1 (Bloomberg) -- Lamido Sanusi, governor of the central bank of Nigeria, talks about the country's decision to set up a so-called bad bank to buy toxic debts from lenders. Sanusi also discusses the Nigerian exit from the World Cup in South Africa. He speaks with Francine Lacqua on Bloomberg Television's "Countdown." (Source: Bloomberg)
Nigeria is “comfortable” with current naira levels and believes the currency is unlikely to come under pressure, with foreign reserves capable of funding 17 months of imports, central bank Governor Lamido Sanusi said.
The currency of Africa’s second-biggest economy appreciated to the strongest level in more than three months versus the dollar, strengthening 0.1 percent to 149.7 naira by the close yesterday in Lagos, the commercial hub.
“The bank is comfortable with the current exchange rate,” Sanusi said in an interview in London yesterday. The stable exchange rate has helped keep Nigeria’s inflation between 10.4 percent and 12.5 percent since June last year. “The system will only come under strain when foreign reserves fall to less than 12 months of imports.”
Nigeria’s foreign reserves, the source of funding for the central bank’s twice-weekly auction of currencies to banks, stood at $37.2 billion as of June 29, compared with a high of $58.3 billion in March 2008. The bank supplied $10.8 billion to lenders seeking $9.7 billion at foreign-exchange auctions since the start of the year and sold $250 million at yesterday’s sale at rates of between 148.5 to 148.65 naira per dollar.
Nigeria, which depends on oil exports for more than 95 percent of foreign-exchange income according to the Finance Ministry, experienced a decline in reserves as oil prices plunged following the global financial crisis. Oil is trading 49 percent below its high of $145.29 reached in July 2008.
Foreign-exchange supply by the central bank has kept pace with demand since the naira traded at a six-month low against the dollar on May 18.
Currency Defense
“The fall in Nigeria’s reserves reflects the authorities’ attempts to defend the currency amid a more general global trend, which has seen other emerging-market currencies and reserve positions come under similar pressure,” Stuart Culverhouse, the London-based chief economist of Exotix Ltd., said in a note to clients on June 23. Exotix gets a quarter of its revenue from African securities and three quarters from frontier markets.
Nigeria can afford to spend $12.5 billion to sustain the exchange rate at current levels for the next three months, with at least $26 billion remaining in reserves, he said.
The West African nation should be able to meet its foreign- exchange demand for many months to come, Ayo Teriba of Lagos- based Economic Associates Ltd. said in an interview last week. “There will be no reason to significantly deplete the foreign reserves,” he said.
To contact the reporters on this story: Dulue Mbachu in Lagos at dmbachu@bloomberg.net; Philip Sanders in London at psanders@bloomberg.net
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