Nigeria Lowers Naira band to 150-160 Naira to a US dollar

Lamido Sanusi
Governor of the Central Bank of Nigeria

Nigeria Lowers Naira band to 150-160 Naira to a US dollar
Acheme Jack, Lagos

The Central Bank of Nigeria (CBN) lowered the target band of the nation’s currency, the Naira, against the US dollar at the end of its monetary policy committee meeting on Monday after months of monetary tightening failed to bring it back into the preferred trading range.

“CBN moved the band it wants the naira to trade in to between 150-160 naira against the US dollar, compared with 150-155 naira to the dollar previously and maintain the band of +/-3.0 per cent,” the CBN Governor, Lamido Sanusi, said at the end of the meeting.

In his words, “this means that the naira should float roughly within a range of N150.00/US$1.00–N160.00/US$1.00, unless extraordinary shocks necessitate a change in stance.”

The CBN monetary policy committee (MPC) left its benchmark interest rate unchanged at 12 per cent and its 200 basis point corridor around the benchmark.

“The Committee decided by a unanimous vote to retain the MPR at 12.0 per cent and the symmetric band at +/-200 basis points and retain the Cash Reserve Ratio at 8.0 per cent.’’  Sanusi said

Deposit rate was left at 10 percent and lending rate at 14 percent.

The meeting is the last for the year 2011 and for the early part of first quarter of 2012.

Threat to Nigeria’s economy

The Committee noted that international economic and financial conditions had deteriorated with possible threats of financial shocks from Europe, making it very difficult to correct the serious imbalances that have developed in the international economy since the peak of the global economic and financial crises.

Emerging countries including Nigeria are also projected to record lower growth rates in 2011 than in 2010. Given the high degree of real and financial integration with the industrial economies, a quick rebound in growth in 2012 does not seem to be realistic at this point in time.

Solution to threat

Growth performance of industrial and emerging economies in 2012 is vital for Nigeria’s economic performance.

Oil demand, in the Committee’s view, would soften as a consequence of slow global growth and would necessitate comprehensive and sound policy actions to help diversify the domestic economy away from oil.

In the international scene a significant amount of sovereign debt needs to be written off, systemically important banks need to be recapitalized (and if necessary nationalized) and stronger austerity measures need to be put in place in the US and the Europe.

Williams