Nigeria: Foreign currency reserves

On the downside, there has been little improvement to foreign currency reserves, which rose slightly to just over US$38 billion at the beginning of May. Foreign reserves have fallen 15 per cent since the beginning of the year, due in part to President Goodluck Jonathan’s suspension of internationally respected CBN governor Sanusi Lamido Sanusi.

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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Formed Central Bank chief held responsible for Nigeria's economic crisis

Nigerian government has said it holds former Central Bank Nigeria (CBN) governor Charles Soludo responsible for the present problems facing the nation's banking and finance sectors. Nigeria's Minister of State for Information and Communications Labaran Maku said Soludo cause a number of problems within the sector before his departure two years ago.

"We hold Soludo, who was CBN governor until about two years ago, accountable for all that is happening in the banking and financial sectors," said Maku, adding that in the last year, Nigeria has been contending with issues in the financial sector resulting from Soludo's misdirection and sometimes misapplication of the banking reforms.

Maku said that the Assets Management Company of Nigeria (AMCON) is to address some of the issues troubling the financial industry, and added that the report which the government got from the present CBN governor, Sanusi Lamido Sanusi, on the state of the economy showed that the economy is due to grow by 7 per cent and that this projected growth will increase from year to year as the nation proceeded with the implementation of the programme.

Soludo had warned that if pre-emptive measures are not taken now, Nigeria's economy is "doomed" to a worse form of structural adjustment programme. In an essay published in a national daily, Soludo, who ran for governorship election in Anambra State in March, expressed concern that the government had been piling up domestic and foreign debts with no improvement in the economy.

Source: AllAfrica

For more news and expert analysis about Nigeria, please see Nigeria Focus and Nigeria Politics & Security.