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Published On: Thu, Jun 5th, 2014

Naira drops as Emefiele settles down at CBN

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Mr Godwin EmefieleBy Etuka Sunday,with agency report.

The nation’s currency, the Naira, dropped to a one-month low of N163.85 yesterday shedding 0.69 percent against the US dollar after the new Central Bank of Nigeria (CBN) governor, Godwin Emefiele announced his plans to gradually reduce interest rates.

It would be recalled that the currency closed at N162.72 to the dollar on Wednesday. A report on Reuters said the Naira was last seen at this level on May 8, this year, when it traded at N163.90 against the US currency.

Dollar demand was boosted by investors repatriating dividends abroad, while a lack of fresh supply of hard currency from oil firms coupled with the Central Bank’s new stance on interest rates weighed on the Naira, dealers told the news agency yesterday.

“If interest rates are going to fall … that could lead to a panic sell-off, with negative implications for the Naira,” one currency dealer said.

Emefiele had yesterday, while unveiling his agenda for the apex bank said he would pursue a gradual reduction in interest rates, an apparent reversal of his predecessor’s policy which was credited with bringing inflation down to single digit.

“There is no doubt that reducing interest rates and maintaining exchange rates are very daunting twin goals,” he said.

“However the Central Bank will work assiduously to … ensure that these goals are mutually achieved,” he added.

His comments triggered a fall in bond yields and treasury bills as well as in the naira.

Analysts said there was a strong link between naira stability and high interest rates and that Emefiele did not outline what steps he would take to achieve lower interest rates in the run-up to elections next year.

However, the apex bank boss has stopped with immediate effect, all charges on deposits by customers of banks.

This, he said, was to ensure the success of the cashless policy introduced in 2012 in Lagos, Kano, Anambra, Abia, Rivers and the FCT, and expected to go nationwide by 1st of next month.

The CBN governor said further that the charges being imposed for cash deposits have made many customers to resort to opening multiplicity of accounts and other disingenuous behaviours that would undermine the objective of the cash-less policy.

“Over the course of the pilot, we have become aware of complaints by customers particularly regarding the charges being imposed for cash deposits. This has resulted in customers devising various means to avoid the charges through opening of multiplicity of accounts and other disingenuous behaviour all aimed at undermining the objective of this policy. Given these outcomes and to better reflect our goal of having more cash under our control, all charges on deposits are hereby stopped with immediate effect”, he stressed.

Emefiele however said that, “Charges on withdrawals, in view of their eventual elimination, remain sustained at the current 3 percent for individual transactions exceeding N500,000 and 5 percent for corporate transactions exceeding N3 million. Currently, these fees go entirely to the commercial banks. However, going forward, the Central Bank shall determine what percentage of these fees on excess drawings that will be redeemed by the bank while the rest shall be remitted to the CBN,” he said.

According to him, “the vision of the Central Bank of Nigeria is to ‘be the Model Central Bank delivering price and financial system stability and promoting sustainable economic development’. This vision draws inspiration from our understanding of the multiple mandate of the bank to pursue both price and financial system stability as well as provide complementary developmental functions by creating an environment for Nigerians to live better and more fulfilled lives”.

He said his vision was to build a Central Bank that is professional, apolitical and people-focused.

“In order to realise the CBN’s vision, therefore, I believe we must start with championing policies that promote the sustainability of our hard-earned macroeconomic stability,” he said.

“Although Nigeria produces millions of barrels of crude oil per day, the importation of refined petroleum products alone consumes about 35 per cent of our annual import bill.

“The CBN will support efforts at domesticating our oil and gas resources, to ensure that much more of these resources are produced and used in Nigeria.

“This will stimulate inclusive growth, create jobs and reduce the pressure on the exchange rate occasioned by demand for the importation of finished petroleum products”, he said.



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