Business CBN to withstand demand to depreciate Naira

jeff juwana

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The Central Bank of Nigeria, said it will withstand pressure of depreciating the naira since it holds enough funds to defend the currency. CBN spokesperson Mr. Ugochukwu Okoroafor, said the CBN Governor, is expected to stay the course until his term is up in 10 months.The naira has depreciated in recent months due to foreign investors booking profits on their naira assets, and on importers buying dollars.Okoroafor said by telephone that the institution remained committed to the band. and has the resources to meet demand. Kingsley Moghalu, CBN Deputy Governor also said there were no plans to change the band in an interview with the Press in London on Tuesday.But a similar naira weakness, partly caused by excessive spending prior to 2011 national elections, forced the central bank to lower the target band from 145-155 naira to the dollar in November that year, .Pressure on the currency will worsen next year as elections loom again in 2015 ."It’s the case all over the world – governments tend to spend a lot leading up to elections," Moghalu said. The unit has hovered around the 162-163 level in recent months, on strong demand for dollars. Gaimin Nonyane, an economist at Ecobank, said that devaluation of naira would … increase inflationary pressures. He believes that the central bank’s commitment to promoting price stability, will maintain current rate. CBN Governor, Lamido Sanusi has repeatedly warned that excessive election spending poses an inflation risk that he is ready to counter with tight monetary policy. He has spent billions of dollars of foreign reserves over the past months in keeping the naira.In July, the Bank tightened liquidity using about a 50% reserve requirement on public sector.Moghalu said, however, that the purpose of the reserve requirement hike was to encourage banks to lend more, rather than to boost the currency."We are comfortable," said Moghalu. "The naira has appreciated a bit in recent days."
 
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