Nigeria to act to defend naira from “speculative attack”
Nigerian Central Bank Governor Lamido Sanusi said he will act to defend the nation’s currency should it come under “speculative attack” not warranted by developments in the economy.
The central bank will “intervene if there is a depreciation which is completely out of tune with fundamentals,” Sanusi said in an interview today in Kinshasa, where he’s attending a conference of African central bankers. “However, if in our judgment, we feel that reserves are at risk and oil prices are falling, then we’ll allow the naira to slide.”
Nigeria, the continent’s second-largest economy behind South Africa, earlier this month ordered banks to stop trading foreign currencies bought at its auctions in an effort to stem a decline in the naira. The currency has weakened 12 percent this year after the price of oil, which accounts for more than 90 percent of Nigeria’s export revenue, slumped.
The naira is no longer “falling rapidly,” Sanusi said. The currency closed at 156.4 per dollar yesterday, according to Citigroup Inc.’s Nigerian unit.
“What we’re going to have is a stable depreciation if at all. Given what’s happening with oil prices and the improvements with peace in the Niger Delta, we may actually be able to stem it.”
The price of crude oil has climbed 29 percent this year after falling 68 percent from a record on July 14 last year. Nigeria vies with Angola as the continent’s biggest producer. Nigerian President Umaru Yar’Adua on Aug. 6 offered to free the estimated 10,000 rebels in the country’s oil-rich Niger Delta region from prosecution if they lay down their weapons. The offer expires on Oct. 4.
Inflation to Slow
Sanusi said he expects the country’s inflation rate to slow to below 9 percent by the end of this year. Inflation in Nigeria, the continent’s most populous nation, slowed for a fifth month in July, easing to 11.1 percent as the government cut spending.
The economy is “on the trajectory for 5 percent growth” this year, Sanusi said. Growth slowed to 6.3 percent in the first quarter.
Foreign reserves rose in August, the first time since February, a further sign of a stabilizing economy, Sanusi said.
“In August so far, they’ve firmed up” after dropping billions of dollars in the months till end-June, he said. The country had $42.8 billion in foreign reserves as of Aug. 19, according to data on the central bank Web site today.