Governor of the Central Bank of Nigeria, Mallam Lamido Sanusi
The
naira is at risk of being devalued after President Goodluck Jonathan
suspended the Central Bank Governor, Mr. Lamido Sanusi, last week,
eroding confidence in monetary policy and sending the naira to a record
low.
Bloomberg reported that the naira,
which rose for the first time in six days on Monday, posted its biggest
five-day drop in eight months last week.
The yield on Nigeria’s July 2023 dollar
bond had its steepest one-day jump on record after Sanusi’s removal on
February 20. The security has lost 2.3 per cent this year, compared with
a 0.6 per cent drop in the JPMorgan Chase & Co. index of African
sovereign debt.
While the acting governor pledged
continuity in policy on February 21, saying there were no plans to
devalue the currency, the central bank will have to fight to keep the
naira within its targeted range of three per cent above or below 155 at
twice-weekly foreign-exchange auctions.
The peg may be shifted to 170 per dollar, boosting inflationary pressures, according to Yvonne Mhango at
Renaissance Capital.
“The market seems to be anticipating a
devaluation,” Mhango, a sub-Saharan Africa economist at RenCap, said in a
February 21 phone interview from Johannesburg. “Given the loss of
confidence and sentiment turning against Nigeria, I think they’re going
to struggle to keep the naira at present levels.”
The suspension of Sanusi, 52, followed
the governor’s calls for an investigation in December into billions of
dollars in missing oil revenue.
Sanusi, who was due to leave office at
the end of his term in June, oversaw a drive for stability in Africa’s
second-biggest economy. Sarah Alade, his deputy, was named acting
governor.
Nigeria’s “economic fundamentals cannot
be predicated on a single human being,” a central bank spokesman
Ugochukwu Okoroafor said on the phone from Abuja on Monday.
“The person coming to succeed Sanusi is a
strong player in the industry and knows what to do on monetary policy.
There is no basis nursing fears of a devaluation.”
Alade has given assurances that monetary
policy won’t change, Doyin Okupe, a spokesman for Jonathan, said in a
mobile-phone text message.
“The initial fluctuations following the suspension have stabilised,” he said.
There’s “no indication whatsoever that a devaluation of the naira will occur,” Okupe said.
Sanusi could return if cleared of
allegations, Jonathan said on state-owned NTA television on Monday,
adding it was within his powers to remove the central bank chief.
The currency gained 0.1 per cent to
N164.35 per dollar by 10:34am in Lagos, strengthening for a second day
after the CBN auctioned $399.7m to lenders. It also sold dollars
directly to banks, Kunle Ezun, an analyst at Ecobank Transnational Inc.
in Lagos, said on the phone on Monday.
The bank’s Monetary Policy Committee has
kept the benchmark interest rate at a record high of 12 per cent for
more than two years, pushing inflation below 10 per cent. Consumer-price
growth climbed above 15 per cent in the first half of 2010.
If the currency is devalued in July at
the first MPC meeting under Godwin Emefiele, Jonathan’s nominee to
replace Sanusi, consumer-price growth may climb to as high as 12 per
cent by year-end, Mhango said in a February 21 note.