₦airaland Forum

DEVELOPMENTS in the foreign exchange market are putting the Central Bank of Nigeria under intense pressure to further devalue the naira.

The currency has been experiencing free fall since November 25, 2014 when the          CBN Monetary Policy Committee devalued it by eight per cent from 155 to 168 against the United States dollar.

Following Saturday’s announcement of the postponement of the general elections by six weeks, the naira on Monday plunged from 188 to 200 against the dollar.

The Bankers’ Committee gave the hint of further devaluation on Thursday just as the nation’s External Reserves dropped by $1bn in 12 days.

The committee which comprises the Central Bank of Nigeria governor, the deputy governors, chief executive officers of Deposit Money Banks and other stakeholders, said the managers of the economy, including the CBN, were currently seeking a new level to devalue the already battered currency.

Members of the committee met for over three hours in Lagos to review developments in the banking sector and the economy, among other issues.

The meeting, which was chaired by the CBN Governor, Godwin Emefiele, later appointed the Managing Director, Guaranty Trust Bank Plc,   Segun Agbaje; Managing Director, FCMB,   Ladi Balogun; Managing Director, CitiBank Nigeria,   Omar Hafeez; and Director, Banking Supervision, CBN,   Tokunbo Martins, to brief the press on some of its deliberations.

Agbaje said the currency was going through a period of ‘‘price discovery’’ to determine a new level for the currency.

He said, ‘‘where we are now is that oil prices are down. As a country, we are trying to find what level the currency devalues to. There is no central bank in the world that allows a free flow of its currency. What you do is try to find a price discovery and find a rate at which you can live with. I think we are going through that process in Nigeria. That is why at the last MPC meeting, the CBN devalued and also moved the midpoint of the naira. What you are seeing in the interbank market is again some price discovery.”

The GTBank boss explained that ‘‘devaluation is not a curse’’, adding that some major currencies of the world had gone through the process in recent times.

According to him, no nation   allows free flow of its currency.

Agbaje said, “I think that on the issue of exchange rate, exchange rates are very emotional things. The reality is that devaluation is not a curse. The Norwegian Krone, which is one of the strongest currencies, devalued by 13 per cent last year. I think about half way through last year, the pound to the dollar was about 1.67; today, it is barely 1.52. So, where we are today is that oil prices are down.

“The thing about price discovery is that rates would go up and rates would come down. And so for those who chose to speculate, you run the risk of actually losing money.

“So until we find what that rate is, which I believe in my own opinion we are around there now, and I believe that the CBN is also going through that price discovery, when they get there.

“Any country that has over $30bn in its reserves is able to defend its currency at a realistic rate. So, I don’t think we have a state of chaos around.   I told you about some very strong economies that have gone through some devaluation; so, it is not a curse.”

Agbaje also said that the CBN had no plans to change rules regarding the operation of domiciliary accounts.

He said, “There will be no change in the operation of domiciliary accounts. The CBN remains committed to the foreign exchange market. There will be free flow of funds into and out of the domiciliary accounts’’.

The GTBank boss added that banks’ exposure to the oil and gas sector did not pose any challenge to the banking industry because the CBN had already carried out a stress test on all the banks with oil prices at $50 and $55 per barrel.

Balogun also told journalists that despite the fall in oil prices, government revenues last year increased by N75bn.

Balogun, who added   that about N150bn increase was being expected this year, explained that owing to the structural challenges in the economy,   banks would support the government to diversify the economy.

According to the FCMB boss,   banks will ensure that loans are given to   Small and Medium-scale Enteprise operators   and people in the agricultural sector.

Hafeez, said due to the volatility in the foreign exchange market, the CBN had said that it would continue to meet the liquidity needs of the market, adding that Emefiele had said that the market did not need to panic any longer.

Martins said despite the volatility in the foreign exchange market,   the country’s banks were still sound, safe and strong.

She said the capital adequacy levels, liquidity ratios, profitability, asset quality and other ratios of the banks were all above average and the regulatory minimum.

On the banks’ exposure to the oil and gas sector in the light of   falling oil prices, Martins said Nigerian banks had one of the highest capital levels in the world, adding that they were safe should the unexpected happen.

Emefiele   told the CNBC Africa on Thursday that there was “no need to panic” about a slide in the currency, after figures showed that the bank had been burning through more than $110m a day in an   attempt to defend the naira.

“We are not in the best of times but there’s no need to panic,” he said, ruling out an emergency Monetary Policy Committee meeting. He   stated that floating the currency was not an option.

Figures on the CBN website on Thursday showed that the foreign exchange reserves fell to $33.4bn as of February 10, a drop of $1bn over the previous 12 days as the CBN sold hard currency to defend   the naira.

The reserves stood at $34.4bn on January 27, 2015.

Meanwhile, reports on Thursday indicated that the naira was likely to continue its fall next week as investors worry over the postponement of the general elections by the Independent National Electoral Commission and its impact on the economy and the country.

The naira hit a record low of 206.60 against the dollar on Thursday at the interbank market, and dealers halted electronic trading for the second consecutive day.

Dealers had halted trading on Wednesday when the naira hit 204 against the dollar.

“Demand remains strong and unless we have large dollar inflows into the market, the local currency will continue to be under pressure,” a dealer said.

The CBN has repeatedly sold dollars to support the local currency. It   has also been relying on the external reserves to defend the naira.

However, other African currencies like the Ghanaian cedi and Kenyan shillings are expected to remain strong next week.

sincerenigerian:
Jonathan is a goner! This economy is a mess. Jonathan and his economic team should have prepared for this by diversifying our economy. The financial future of our country looks bleak.

My advice to everyone is to go and withdraw everything you have left in the bank and convert the money to either dollars or pound sterling.

barcanista:
Our economy is in deeeeeeep shiiiiit. Unfortunately, our economic team seem to be confused and on fire brigade approach. Aside the politicians, I also blame the banks that refuses to give loans to SMEs despite their rhetorics. Our Bankers are giving "fake" assurance verbally when statistics on ground shows otherwise. We may need to consider austerity because we can't continue to deceive ourselves like Greece until we face total collapse. The Good news is that if government can/will stop the waste, theft and pursue holistically a diversification of the economy, there become prospect of a strong bounce back. The Bank should encourage our enterpreneurs with soft loans. Government shoud provide enabling environment for business to thrive. Infrastructures should be provided. #Nigeria must not fall. Sai Buhari

cycline404:
When that state comes when NGN would be competing with Zimbabwe currency

biafranqueen:
You should thank Soludo for the banks stingy stance on loaning money to companies with no track records of repayment. Besides the Nigerian interest on loans is outrageous right now.

When will you give GEJ credit for saving millions from fake ghost workers ?

barcanista:
Soludo caÑnot absolve himself from our economic woes. He presided over the CBN and watched as the CEOs and directors of financial institutions ran the sector aground, which affected our stocks. They gave bogus loans without feasible repayment plan to themselves and their godfathers. Anyway, we've passed Soludo era. The present economic managers are disgraceful and incompetent. So much lies and corruption, telling us what sweets our ears rather than doing what favors our economy. The diversification policy would have been perfect if officers of governmnt implement it with sincerity. Most importantly, government should fight corruption and not appear to encourage it. We must also fight nepotism so that competent people will be manning positions and be productive rather than mediocres. I wish the economy well. Sai Buhari

UchihaMadara:
I hope that won't happen.

I was just trying to remember the last time I used this:

https://static-numista.com/catalogue/photos/nigeria/g8.jpg

don't even know if you can still find it anywhere.

biafranqueen:
Fight nepotism with Tinubu's whole family in Government?
Kai Buhai!

biafranqueen:
You should thank Soludo for the banks stingy stance on loaning money to companies with no track records of repayment. Besides the Nigerian interest on loans is outrageous right now.

When will you give GEJ credit for saving millions from fake ghost workers ?

sunnydayasaba:
The Banks brought this upon us, because the only thing they do is finance d importation of oil and foreign goods.

Nigerian banks are manage by d wrong people who lack vision. They should have expected dis to happen. Nigeria is not d only oil producing nation in d world but where feeling it harder cus of poor preparations

biafranqueen:
Fight nepotism with Tinubu's whole family in Government? What do you call ivestigating and eliminating the ghost?
Kai Buhai!

barcanista:
Who is talking of Tinubu here? Wetin concern Buhari and Tinubu? Anyway, you get my message I guess...?

Weak euro could help European recovery

Exports will be cheaper, which will especially be good for Germany

5/18/2010

BERLIN — As jittery markets fret about the plunging euro, experts say there's a potential upside: Europe's economies stand to profit from the drop of the common currency as exports to the United States and Asia become cheaper.
The euro has dropped in value by nearly a quarter since its height of euro1.6038 in 2008, down to $1.23 Tuesday. That means a German car priced at euro50,000 two years ago — worth $80,000 in U.S. dollars at the time — would cost the equivalent of a little more than $60,000, strictly according to currency effects.

The lower euro is an advantage especially in Germany, the eurozone's largest economy and an export powerhouse.
"The euro's becoming weaker naturally helps the German export economy and that helps all of the German economy get back on track," Volker Treier, chief economist at the German Chambers of Industry and Commerce, told The Associated Press on Tuesday.
"Exports are the factor in the gross domestic product that has helped liven up the economy," Treier said.

After having slowed in 2009, German exports in March jumped 10.7 percent on the month and the think tank IW reported this week that it was now predicting a 7.25 percent increase in exports from Germany, Europe's largest economy, on the year. It predicted a further 6 percent for 2011.
The euro's drop against the dollar "tends to favor the German export economy," IW director Michael Huether said. "On this background, exports will become a driving force of economic recovery in Germany."

Adminisher:
You are a funny guy? I think a lot of you don't think because tribalism has eaten into your brains. The Naira is going to be N250 to the dollar inmMay and you are talking rubbish. The only corruption you see is ghost workers whereas if you are not a coward you will admit that the cause of the Naira's fall is 2trillion yearly spent in importing fuel, a lot of it overinvoiced causing a lot of it capital flight out of Nigeria since 2011.
How can the country improve when people cannot face the truth?. Dem curse you because you get black skim?. Starting March, 2015 heavy retrenchment of workers is going to start, most western firms will run away because of high cost of operations. You dont have power because Jona did not do the refineries and fuel for generators will start increasing for a different reason which is the exchange rate.

biafranqueen:
No I don't get your message. Buhari with his F9 in math and Tinubu as the father of APC is a recipe for disaster on our economics. Keep thinking short term while others are solving long term problems.

sunnydayasaba:
The Banks brought this upon us, because the only thing they do is finance d importation of oil and foreign goods.

Nigerian banks are manage by d wrong people who lack vision. They should have expected dis to happen. Nigeria is not d only oil producing nation in d world but where feeling it harder cus of poor preparations

biafranqueen:
You're talking rubbish investors are trooping into Nigeria as we speak your rant on N/L stops nothing.

anonimi:
This mass importation is what the Jonathan/Sambo team is making steady progress in rectifying with creative import tariffs, intervention funds for target industries etc.

sincerenigerian:
Jonathan is a goner! This economy is a mess. Jonathan and his economic team should have prepared for this by diversifying our economy. The financial future of our country looks bleak.

My advice to everyone is to go and withdraw everything you have left in the bank and convert the money to either dollars or pound sterling.