By Emele Onu with agency reports, 06.14.2010
The Central Bank of Nigeria (CBN) is considering holding a part of Nigeria’s external reserves in the Chinese Yuan. This is being considered in order to preserve the value of the nation’s external reserves and eliminate losses at a time of increased volatility in major world currencies.
Reuters quoted CBN Governor Sanusi Lamido Sanusi as saying during an interview in Paris at the weekend that the “CBN was also considering diversifying its forex reserves with a small shift into Asian currencies, in particular the Chinese Yuan.”According to Reuters, Sanusi said on the sidelines of the 10th International Economic Forum on Africa in Paris that “it was extremely important to maintain exchange rate stability,” and that the country's forex reserves were adequate to defend the naira at current levels.
There is fresh concern that the falling price of crude oil as well as depreciation in the value of the currencies they are held in, will affect the value of the reserves and the capacity of CBN to continue to defend the Naira. Nigeria’s external reserves dropped to $38.41 billion last weekend from $40.30 billion at the end of April, according to data posted on the CBN website.
The reserves were said to be at $43.57 billion during the same period last year, and ended 2009 at $42.40 billion. The monetary authority holds 15 per cent of Nigeria ’s foreign currency reserves in Euros and almost 80 per cent in US dollars. But the Euro has slumped against the dollar since last month as concerns mount that Greece’s debt crisis might spread to other nations in the euro-zone.
Director of Reserves Management Department of CBN, Lamido Yuguda, had said in Abidjan recently, ahead of the African Development Bank’s annual general meeting that the CBN might reduce the amount of Euros it holds in its reserves if the European currency’s decline continues.Yuguda had told Bloomberg news that “we don’t change because of short-term developments, if there are long- term concerns then we’ll change it.”
He added that CBN was considering setting the minimum of reserves it holds at the equivalent of 12 months of import requirements, compared with six months currently, to cushion the economy if there are further crises.”