Emefiele promises stronger naira Godwin Emefiele on Tuesday assumed duty as new Governor of the Central Bank of Nigeria (CBN), with a pledge to immediately begin the task of protecting the naira, which in recent months has come under hammer, falling way below the official rate against major global currencies. According to Daily Independent, The new CBN helmsman hopes to ward off pressure to devalue the naira and keep inflation at single digits which it has maintained in recent months, despite rising slightly in April. Emefiele replaces Lamido Sanusi who had been suspended on February 20 by President Goodluck Jonathan following allegations of financial recklessness. Already, Emefiele has pledged to maintain stability in the naira, arguing that devaluation will be “devastating” for the economy. The bank is “likely to maintain naira stability as the overriding priority ahead of February 2015 elections,” Philippe de Pontet, Africa director at New York-based Eurasia Group, said in an e-mailed note to clients. Emefiele, who was cleared for the new job by the Senate on March 26, was said to have “arrived at the CBN Headquarters at 7.30 a.m. June 3, 2014, to the warm embrace of the four Deputy Governors and expectant staff, led by Dr. (Mrs.) Sarah Alade, whose tenure as Acting Governor ended on Monday, June 2, 2014”. At the brief formal handing over ceremony, he “thanked the erstwhile Acting Governor, Dr. Alade, and the other Deputy Governors as well as members of the media for gracing his formal assumption of office”. Emefiele, according to a statement by Isaac Okoroafor for the Director of Corporate Communications, will on Thursday “unveil his agenda for the Central Bank of Nigeria and the people of Nigeria,” at a maiden press conference in Abuja. Nonetheless, analysts believe Emefiele, until now, Managing Director of Zenith Bank Plc, has his job cut for him – having to stabilise the naira ahead of next year’s general elections, and at a time when politicians are known to have engaged in stacking foreign exchange for non-productive ventures. The government accused Sanusi of irregularities in his handling of the central bank’s budget and the President has assured that the bank’s independence will remain sacrosanct. The naira is currently trading at around N162/US$, above the CBN’s preferred N150-160/dollar range, just as it oscillates between N168 and N175/$ at the black market. Speaking at a function in Abuja last month, Bismarck Rewane, chief executive of Lagos-based Financial Derivatives Limited, urged the apex bank to adjust the naira exchange rate range to reflect the realities of the economy. He pointed out that holding the exchange rate band at all cost within the CBN’s target band of N150 to N160 to the US$ was no longer desirable, given the pricing and real performance realities in the economy. He spoke against the backdrop of dwindling revenues to government coffers and the implications for the nation’s macroeconomic stability, noting that no matter how hard the CBN tries to maintain the current currency exchange rate band, the imperatives of the domestic and international economic developments would dictate its adjustment. Another challenge before Emefiele, analysts say, will be to keep inflation within single-digit target, despite loosed fiscal policy ahead of the 2015 polls. Repeated intervention by the central bank to keep the naira within the band has run down foreign exchange reserves, and liquid reserves have declined by about $6.53 billion or 18.2 percent from $42.46 billion at the start of 2014. According to Reuters, “analysts expect Emefiele to be more discreet than Sanusi, who was often criticised by government officials for going far beyond his remit with his criticisms of government spending”. Monetary policy choices may be limited. He could raise the policy rate, which would prop up the naira and attract investors to domestic debt but hurt lending, or devalue the naira band.
Posted on: Wed, 04 Jun 2014 01:34:12 +0000
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