FT - Lenders Plan Not To Renew Deals with CBN

Proshare - Facebook Proshare - Twitter Proshare - Linked In Proshare - WhatsApp

Thursday, December 15, 2016 11:21 AM / by Maggie Fick , FT

This “move highlights an erosion of confidence in the monetary authority”.

Several banks will not renew agreements worth billions of dollars with Nigeria’s central bank, highlighting the erosion of confidence in the monetary authority, bankers say.

The move, which relates to foreign currency swap agreements between banks and the central bank, risks depleting the country’s dwindling foreign reserves as Nigeria faces a severe dollar shortage, bankers warn.

Nigeria’s gross reserves have plummeted by 40 per cent to $24bn since oil prices crashed in mid-2014 as Africa’s top crude producer grapples with its worst economic crisis in decades. The shortage of greenbacks is already choking important sectors of the economy, from airlines to importers of fuel to manufacturers.

Godwin Emefiele, central bank governor, has sought to use foreign currency swaps to bolster dollar reserves, swapping large amounts of naira in return for dollars with about six of the country’s 22 banks.

But bankers say they have begun refusing to allow the central bank to renew these swaps — most of which expire within the next year — because they have lost confidence in Mr Emefiele’s management of the currency and foreign exchange market.

The central bank is holding less than $4bn in foreign currency swaps according to data on its website, which is not large enough to trigger a currency crisis overnight. But bankers and analysts say the decision by banks to reduce their exposure to the central bank highlights broader concerns in the market that has caused investors to virtually stop bringing hard currency into Nigeria.

Without the return of foreign capital inflows, they say, Nigeria cannot climb out of recession.

A chief complaint among bankers and analysts is that central bank continues to intervene to prop up the value of the naira despite Mr Emefiele announcing in June that monetary authorities would move to a “purely market-driven” currency system. Bankers say the lack of policy credibility in managing the currency raises questions about Nigeria’s ability to provide dollars to banks as a recession deepens.

Read the full article here  - Lenders plan not to renew deals with Nigeria central bank

Related News

1.       CPI Rises to 18.48% in November, 0.15% Higher Than 18.33% October Rate

2.      US Raises Rates by 0.25%, Anticipates 3 Increases in 2017

3.      President Buhari's 2017 Budget Speech - Full Text

4.      LBS Executive Breakfast Session - Dec 2016 (Running Faster to Stand Still)

5.      Movement in Broad Money Supply - Increases by 8% between March and July 2016

6.      CBN Communiqué No. 110 of the MPC Meeting – Nov 21-22, 2016

7.      West Africa RiskMap 2017; No Smooth Sailing in the “New Normal”

8.     The Slow Boat to FX Reform

9.      FMDQ OTC Securities Exchange Revises the Methodology for the Daily Market Spot FX Closing Rate

10.  2017 Budget:President Buhari presents N7.298trl appropriation to NASS

11.   Address by Bukola Saraki to the Joint Session of the NASS on The Presentation of the 2017 Draft Bill

12.  Remarks by Speaker Dogara at the Presentation of the 2017 Appropriation Bill

13.  Bukola Saraki's Remarks at Petroleum Industry Bill Public Hearing

Related News