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Published On: Fri, Feb 21st, 2014

Sanusi’s suspension shuts financial markets

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Sanusi Lamido Sanusi

Sanusi Lamido Sanusi

By Clem Khena-Ogbena, with agency report

  • Naira depreciates against dollar
  • His exit won’t hurt economy – Okonjo-Iweala
  • SLS to challenge removal in court 
  • Atiku, Kwankwaso back legal action 
  • Why he was removed, by Presidency
  • SSS seizes axed apex bank boss’ passport
  • APC, Fashola, SERAP condemn sack 
  • Godwin Emefiele is new CBN Governor 

The suspension, yesterday, of Central Bank of Nigeria (CBN) governor, Malam Sanusi Lamido Sanusi by President Goodluck Jonathan, has affected the nation’s financial markets.

Similarly, the nation’s currency, the Naira was affected as it depreciated by one percent.

Nigeria’s foreign exchange (forex), bond and money markets have all stopped trading because of uncertainty and volatility created by the central bank governor’s suspension, several dealers told Reuters yesterday.

“The market is frozen right now because no one wants to take position and the fact that the market was already short,” said one of the dealers.

Commenting on the development, the Head of Economic Research, EcoBank, Angus Downie, lamented the suspension, saying, “Sanusi did a fantastic job as governor and it will be very difficult to find someone that can continue his line of effort in restructuring the banking sector and strengthening monetary policy to the next phase.

“He was due to step down in June but when something unexpected like this happens it does raise concerns about what is happening with the direction of policy in Nigeria”, the analyst added.

Also, Alan Cameron, Economist at Nigerian Stockbroker CSL, said: “It’s not so much what it does to the CBN (Central Bank of Nigeria), which we believe had a strong institutional foundation and skilled leaders, but what it says about the Presidency itself.

“If the Jonathan administration is willing to discard a safe pair of hands at a time when the currency is being tested anyway, it shows more political motivation than economic awareness.

“Speaking from the perspective of international investors, this is likely to go down badly”, Cameron said.

Melisssa Verreyne, Economist, NKC Economists in Cape Town, remarked, “This is very worrying for the central bank’s independence, and creates uncertainty about the future monetary policy direction.

“The strange allegations made against Mr. Sanusi, and the fact that the government was not content with simply letting his term expire, appear to be aimed at sending a warning to outspoken central bank officials.

“The ability of the central bank to criticise fiscal policy and the remittance of oil revenue is important, as it improves the accountability of the public sector.

“Any reversal of this will jeopardise the central bank’s ability to maintain price and exchange rate stability, due to the pressure on foreign exchange reserves caused by corruption and government withdrawals”, the economist said.

Yvonne Mhango, Africa Analyst, RENCAP, said: “His suspension does raise concern among investors about the ability to sustain the Naira at present levels. We will see more pressure on the currency between now and June, and more weakness than we had anticipated prior to this news.

Razia Khan, Head of Africa Research, Standard Chartered, also said: “The nature of the suspension will come as a significant shock to foreign portfolio investors, whose willingness to invest in Nigeria was very much influenced by the transparency and anti-inflation credibility associated with Sanusi’s policies.

“This will be a significant negative for the Nigerian Naira and Nigerian financial markets. Investors will pay attention to whichever successor is announced, but this is unlikely to sit comfortably”, Khan said.

Samir Gadio, Emerging Market Strategist, Standard Bank, said: “This is a disruptive move which indicates that the CBN has de facto lost much of its independence.

“Clearly it is driven by political motives given Sanusi’s vocal criticism of oil revenue leakages and the opaque fiscal system in Nigeria.

“If anything, this development will compound upside risks to USD/NGN by precipitating the foreign exit and a negative domestic positioning against the Naira.

“Foreign investors are likely to be active sellers of Nigerian assets in coming days subject to market liquidity constraints”, Gadio said.

But the Coordinating Minister for the Economy and Minister of Finance, Ngozi Okonjo-Iweala, said the suspension of Sanusi would not have any negative effect on the Nigerian economy.

The minister, who stated this yesterday in Abuja while briefing the media on the suspension, also gave the assurance that the federal government was ready to manage the post-Sanusi economy in a manner that would continue to be the envy of all stakeholders.

“When the news broke out on the suspension of Sanusi Lamido Sanusi, the governor of the CBN, there have been concerns in the market, which is not unusual; you know when there is movement of one of the major avenues for managing an economy, there are bound to be some reactions but I just want to use this opportunity to focus on our market participants of the resolute attention of this government to begin to manage the economy.

“Our objective remains to maintain macroeconomic stability, that has been the hallmark of this government and of this administration. It is the maintenance of macroeconomic stability that has enabled us to continue to transform the different sectors of the economy and that will not change”, she said.

“I assured that there will be no change in the policy stance of government in this economy and the tight fiscal and monetary policy will continue”, she added.

On the appropriateness or otherwise of suspending Sanusi at this time, the minister said, “It is the president’s prerogative. That’s why I won’t comment on the issue of how the CBN governor was removed, but we know that an acting governor is in place.

“Dr Sarah Alade is the longest deputy governor of CBN. She has the experience. She has been part and parcel of the former policies, we know that the policy on stability will continue”, she added.

Meanwhile, President Jonathan yesterday announced the choice of Managing Director of Zenith Bank Plc, Godwin Emefeile as the new CBN governor.

He said through a statement by his media aide, Reuben Abati, that Emefiele’s name has been forwarded to the Senate for confirmation of the appointment.

While condemning Jonathan’s action, former Vice President Atiku Abubakar urged Sanusi to challenge the illegality in court.

On his part, Governor Babatunde Fashola of Lagos state described the removal of Sanusi as baseless.

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