Dec. 5 (Bloomberg) -- Nigeria’s financial system is not under threat from speculative investments valued at about $10 billion, Central Bank of Nigeria Governor Lamido Sanusi said.
Nigeria would still have $36 billion in reserves if the investments left the country, Sanusi said today at a conference in Abuja, the capital. High interest rates have kept inflation below forecast, stabilized the naira and helped raise foreign currency reserves, he said.
“The policy is working” in providing price stability, the core mandate of the bank, he said. “I don’t like high interest rates, but we have stability and that’s what I’m paid to do.”
The Monetary Policy Committee, led by Sanusi, has left its policy rate unchanged at a record 12 percent this year to help support the naira and curb inflation. Inflation rose to 11.7 percent in October, staying below the central bank’s forecast of as much as 15 percent after the government cut a subsidy on gasoline in January.
Foreign investors account for 70 percent of transactions on the Nigerian Stock Exchange, according to Chief Executive Officer Oscar Onyema. The value of Treasury bills sold by Nigeria rose 31 percent to 2.1 trillion naira ($13.4 billion) in the first half of this year earlier, while bonds increased 12 percent to 3.7 trillion naira, according to the central bank.
There’s no evidence that lower interest rates will necessarily spur economic growth, as the biggest obstacles to borrowing and credit are lack of power supply, roads and other infrastructure that businesses need, he said.
“I do understand the pain that the borrowers” paying high interest rates,’’ Sanusi said. Still, “let’s not exaggerate this transmission, the potential of a lower interest rate to increase gross domestic product,” Sanusi said.
A tight monetary policy stance helped to lift some of the pressure on the naira caused by “leakages” including fraudulent fuel subsidy payments and crude oil theft worth $7 billion last year, Sanusi said citing figures released by the Petroleum Ministry.
“If that money had gone into reserves, we wouldn’t have had the pressure on the naira that forced us to tighten,” he said.
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