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Published On: Thu, Oct 1st, 2015

CBN worried over slowing growth

Central Bank of Nigeria (CBN) will retain foreign currency controls because of concerns about slowing growth, a senior bank official said on Wednesday as the nation awaited a new cabinet, reports Reuters.

President Muhammadu Buhari submitted the list of his nominees for cabinet posts to the Senate for approval on Wednesday, but the names were not immediately made public.

Foreign investors had criticised Buhari for failing to appoint ministers since he took office on May 29, leaving the central bank to deal alone with a hammering of the oil-dependent economy.

Since his inauguration, a fall in vital oil revenues has eroded public finances, weakening the national currency and driving up the cost of food imports.

Growth was 2.35% in the second quarter year on year, compared with 6.54% in the same quarter of 2014.

“We are concerned that we are having declining growth,” Moses Tule, the central bank’s monetary policy director, told reporters.

He defended the bank’s decision to impose currency controls to preserve foreign reserves, which fell 23 percent in the year to September 23, central bank data showed.

“We have to protect the nation before we protect businesses,” Tule told a conference in Lagos where he came under fire from executives complaining the dollar controls were hurting their businesses.

Import duty collections fell 8.8 percent to N650.74 billion ($3.3 billion) in the first nine months.

Tule said the bank’s decision last week to cut the cash reserve ratio to 25 percent from 31 percent had injected N300 billion into the financial system.

Prior to the move, liquidity on the interbank market had dried up after banks were ordered to move government revenue to a single account at the central bank, part of Buhari’s anti-graft drive.

JPMorgan is removing Nigeria from its emerging markets bond index (GBI-EM), forcing funds tracking the index to sell Nigerian bonds.

“There’s sufficient liquidity in the Nigerian banking system to take up whatever foreign investors may dump, so we are not disturbed,” said Tule.

Central Bank Governor Godwin Emefiele said last week the economy might slip into recession in 2016.

The central bank adjusted its exchange rate peg on Wednesday to N196.95 against the dollar, from the N197 set in July – the sixth adjustment since the introduction of tight controls on the foreign exchange market in February.

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