Nigeria Central Bank Governor Seeks Stable Naira, Rate Cuts

Nigerian central bank Governor Godwin Emefiele pledged to maintain stability in the currency and signaled policy makers may begin cutting interest rates.

“Under my leadership the bank will continue to focus on maintaining exchange rate stability and preserve the value of the domestic currency,” Emefiele told reporters today in the capital, Abuja, in his first public comments since taking office two days ago. “On monetary policy, we shall pursue a gradual reduction in interest rates.”

Emefiele, 52, has opposed a currency devaluation in Africa’s biggest economy and largest oil producer even as foreign reserves slide, undermining the central bank’s ability to maintain the midpoint of the naira peg at 155 per dollar. Investors including MTN Group Ltd., Africa’s biggest phone operator, have increased bets of a devaluation, causing the naira to weaken 1.3 percent against the dollar on the interbank market this year.

Emefiele signaled policy makers may be ready to begin easing monetary policy after keeping the key lending rate unchanged at a record high of 12 percent since November 2011. Inflation eased to 7.9 percent in April, staying inside the bank’s 6 percent to 9 percent target band.

The naira fell 0.7 percent to 163.65 per dollar by 5 p.m. in the commercial capital, Lagos.

Emefiele replaced Lamido Sanusi, who was suspended in February four months before his contract expired for what President Goodluck Jonathan called “financial recklessness and misconduct,” allegations Sanusi has denied.

Development Banking

The governor, a former chief executive officer of Lagos-based Zenith Bank Plc, said he wants the central bank’s mission to include “development banking,” aimed at cutting unemployment and raising Nigerians out of poverty.

“The central bank cannot afford to sit idly by and concentrate only on monetary stability,” Emefiele said. “Additional measures will be required toward identifying productive sectors of the economy and channeling credit toward these sectors.”

Finance Minister Ngozi Okonjo-Iweala said on May 5 that poverty and joblessness are key factors behind the violence raging in northern Nigeria, where Islamist insurgent group Boko Haram has killed thousands of people in a five-year campaign.

Jobless Growth

“Emefiele had no choice but to make a strong statement about unemployment,” Ayo Teriba, chief executive officer of Economic Associates Ltd., a Lagos-based consultancy, said by phone today. “This is an economy that is growing. There is no recession, there is no debt burden and yet we cannot translate growth into increased employment,”

The unemployment rate reached 27.4 percent in 2012 from 12.7 percent in 2007, the government said in its mid-term report released last year.

The bank can contribute to the country’s development by allocating credit and intervening in key industries such as “power, agriculture, medium and small-scale industries, oil and gas, and the health sectors,” Emefiele said.

Nigeria, which surpassed South Africa to become the biggest economy on the continent after recalculating its gross domestic product this year, expects expansion at 6.75 percent this year, according to Okonjo-Iweala.

“Nigeria has witnessed impressive GDP growth rates over the past seven years yet there is an absence of a corresponding reduction in the unemployment rate,” Emefiele said. Youth are the most affected with a jobless rate of 54 percent in 2012.

Before it's here, it's on the Bloomberg Terminal.