Emefiele says central bank will defend naira

Central Bank of Nigeria (CBN) Governor Godwin Emefiele said he would continue to defend the naira after the currency’s plunge to a record low last week.
“There’s no need for anybody to panic or worry,” Emefiele, 53, said in a phone interview today from Abuja, the capital. “The central bank has always intervened. We know our reserves can support nine months of imports, which is far above the minimum expected. We believe we’re very safe.”

The naira weakened to an all-time low on November 7 after a drop in crude prices, prompting the central bank to intervene. In defending the currency rate, Africa’s largest oil producer has reduced its foreign reserves to a four-month low of $37.8 billion. The naira weakened a third day, down 0.8 percent to 169.80 per dollar at 8:39 p.m. in the commercial capital, Lagos.
On November 6, the regulator restricted banks’ use of the standing deposit facility, which allows companies to earn interest on excess cash, in an attempt to encourage lending to local businesses. Emefiele said the move didn’t weaken the naira because banks used their surplus liquidity to buy short-term central bank bonds.
“After that decision, most of them moved their money to the open market operations window,” he said. “We took all that money.”
The central bank has been selling dollars to banks outside its twice-weekly auctions since the naira’s drop on the morning of November 7, Sarah Alade, a deputy governor, said earlier today in an e-mailed response to questions.
“We have been intervening in the market since Friday,” she said.
Last week’s volatility boosted the chance of a 50 basis point increase in Nigeria’s benchmark interest rate, which has been at a record high of 12 percent since October 2011, London-based Capital Economics Ltd. said in a note on November 6. The central bank’s next Monetary Policy Committee meeting is on November 24 and 25.