Foreign reserves are still below the US$40 billion that some analysts believe represents an important psychological threshold on which the capacity of the CBN to deter market speculation on naira devaluation hinges. Bismark Rewane, of the Financial Derivative Company Limited research firm, believes that CBN increases in private-sector cash reserve ratios (CRR) have had little impact on reducing excess liquidity in the banking system, as illustrated by relatively low money-market interest rates.
Banks, analysts, and telecoms operators continue to speculate on the likelihood of a naira devaluation, albeit differing on whether a devaluation would occur before or after the February 2015 election. Although market pressure on the naira has partly receded in recent weeks, that could change if Boko Haram continues to ramp up its insurgency campaign.
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