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Tag: interest rate

  • CBN meets over volatile naira, interest rate

    CBN meets over volatile naira, interest rate

    •Lifts ban on forex sales to BDCs

    The Monetary Policy Committee (MPC) is set to review recent developments in the global and domestic economy at a crucial two day meeting commencing tomorrow in Abuja.

    Topping the agenda for the meeting is the volatility of the naira in the parallel market in the aftermath of the introduction of the flexible forex policy regime, likely interest rate hike, and rising inflation.

    Ahead of the meeting, the Central Bank (CBN) has lifted the ban on forex sales to bureaux de change (BDC) operators.

    In a circular to authorized dealers, the  CBN Acting Director, Trade & Exchange ,W.D Gotring, said the policy shift would ensure the stability of the exchange rate and boost participation of all critical stakeholders in the foreign exchange market.

    The MPC meeting is coming against the backdrop of fears about the global economy, sustained sub-optimal domestic economic performance and declining economic growth and consumer purchasing power.

    Analysts believe the MPC will likely be weighing options on the exchange rates in view of rising fiscal constraints.

    Managing Director, Afrinvest West Africa Limited, Ike Chioke, said the International Monetary Fund (IMF) projected a 1.8 per cent contraction of the Nigerian economy in 2016, a 4.1 per cent downward revision from 2.3 per cent estimated in April.

    Besides, the June 2016 economic data to be released next month would confirm the economy to be in a recession.

    Chioke wants the MPC to be more proactive than reactive in its response to challenges in the economy.

    “The need to regain investor confidence in the aftermath of the newly launched forex framework should be a paramount item on the agenda of the MPC,” he said.

    He expects the MPC to raise interest rate by 100 basis points to 200 basis points and keep other rates constant to attract portfolio capital inflows which is yet to respond to currency market flexibility.

    “We believe the CBN will adjust benchmark policy rate to reflect this tight policy thrust, thus completing its policy back flip by taking the first option tomorrow and next. We believe taking this route will aid the CBN in stabilising the forex interbank market and buy some time for fiscal and monetary authorities to engage in more long term structural reforms to buoy competitiveness,” he predicted.

    The analyst said that since the last MPC meeting, volatility in the global economy has been amplified by Britain’s decision to exit the European Union (EU) at the tail end of last month.

    He said rising inflation, bearish second quarter 2016 growth outlook, weak credit expansion to the private sector, rising level of banks’ non-performing loans and volatility in the forex market have continued to pressure domestic economy and financial market.

    “The feedback effect of reforms in the energy sector has taken a further toll on price level as June inflation rose to 16.5 per cent in amid higher fuel prices and electricity tariff. The implementation of the floating exchange rate regime in the currency market triggered a 41.1 per cent depreciation of the naira as the equities market year-to-date return rose to seven per cent in anticipation of the return of foreign players,” he said.

    Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said the MPC will be closely monitoring the inflation data. He said a precipitated move such as lowering rates is an unlikely outcome at tomorrow’s meeting.

    “The market is still digesting the impact of the N1.3 trillion debit for the $4.02 billion forward sale of forex,” he said.

    Chief Economist, Africa at Standard Chartered Bank, Razia Khan, said inflation remains pressured despite the Central Bank of Nigeria’s (CBN’s) liberalised forex regime which took off last month.

    She said the CBN’s monetary tightening intent is likely to come under scrutiny adding that the requirements for forex liberalisation may supersede banking-sector and wider economic concerns.

    In the circular  entitled Sales of Foreign Currency Proceeds of International Money Transfers to Bureaux De Change Operators announcing  the lifting of the ban on forex sales to bureaux de change (BDC) operators, Gotring said the policy shift would ensure the stability of the exchange rate and boost participation of all critical stakeholders in the foreign exchange market.

    The CBN had in January this year, stopped all forms of forex sales to BDCs, accusing the operators of round tripping and frustrating the policies meant to stabilize the naira.

    But despite the stoppage of dollar sales to BDCs, the local currency has continued to depreciate, and was exchanging at N305 to dollar in the parallel market as at yesterday and N378 to dollar in the parallel market.

    Gotring has now directed all authorised dealers who are agents to approved International Money Transfer Operators to sell foreign currency accruing from inward money remittances to licenced Bureaux De Change Operators (BDCs) with immediate effect.

    He explained that all International Money Transfer Operations are required to remit foreign currency to the agent banks for disbursement in naira to the beneficiaries while the foreign currency proceeds shall be sold to the BDCs.

    “The foreign currency proceeds of International Money Transfer sold to BDC operators shall be retailed to end-users in compliance with the provisions of Anti-Money Laundering Laws and observe the appropriate Know Your Customer  principles, including use of Bank Verification Numbers (BVNs)”.

    Furthermore, he urged authorised dealers and BDCs to render returns on their operations daily and monthly to the CBN through the Electronic Financial Audit Sub-System (e-FASS) application in accordance with extant regulation, failure which there would be sanctioned, including withdrawal of dealership licence.

  • Interest rate hike likely as MPC meets

    Interest rate hike likely as MPC meets

    The benchmark interest rate is expected to go up from 12 per cent after the Central Bank of Nigeria (CBN)-led  Monetary Policy Committee (MPC) meeting on Monday and Tuesday.

    The Monetary Policy Rate (MPR), the benchmark interest rate, was raised by 100 basis points from 11 to 12 per cent in March.

    The Chief Economist, Africa, at the Standard Chartered Bank Razia Khan, in a report, said there would be pressure for an upward adjustment of the MPR.

    Khan said comments by the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, on the unacceptability of a MPR below the inflation rate suggests that the MPR may be tinkered with at next week’s MPC meeting.

    She said: “Our expectation of a 100 basis points MPR hike to 13 per cent in the third quarter 2016 is premised on the expectation of some forex liberalisation taking place as well. While the pressures for forex liberalisation continue to grow, official appetite for any forex adjustment is less certain.

    “Should interest rates be kept deliberately low to help finance a larger borrowing requirement? Or should they be raised, to try to counter inflation? The rising importance of activity outside the banking system means that the traditional transmission of monetary policy and the tools available to policy makers are less effective.

    “It is not clear that supply-side bottlenecks, which have played a considerable role in driving prices higher, can be adequately addressed through monetary policy tools alone.”

    Khan, whose report titled: Nigeria – rising prices put monetary policy in focus, said while the authorities have attempted to put in place “pro-poor” policies, the rise in inflation is a concern.

    According to her “the Standard Chartered Premise Consumer Price Tracker (SC-PCPT) indicator suggests that we should expect even more pressure on inflation in the weeks ahead. The seasonal impact of the planting season will likely be exacerbated by traditional Ramadan-related food price pressure from June. With official inflation reaching 12.8 per cent year-on-year in March, the task for monetary policy has become more complicated.

    “The SC-PCPT  continued to exhibit strong price gains in April, rising 1.07 per cent month-on-month, following a 1.15 per cent price increase in March.”

    Economic growth, she said, was decelerating, adding that this may affect some importers’ demand. “The lengthy wait for forex on the official market may also be discouraging some demand, pushing it to the parallel market instead. With the 2016 budget signed into law on 6 May, we expect some pick-up in economic momentum, although the pace of recovery will still be subject to the overall constraint of reduced forex availability,” she said.

    Khan added: “The outlook for inflation, already reflecting key forex and fuel-related bottlenecks, will be important. Inflation as measured by the SC-PCPT has now risen every month since December last year, and at an accelerated pace. In April, 11 out of the 12 sub-categories surveyed experienced year-on-year inflation. Starchy roots, tubers and plantains – largely domestically grown and therefore more immune to forex pressures – were the only exception.

    “In year-on-year terms, the SC-PCPT increased 5.7 per cent in April, still less than the double-digit rise in food prices indicated by the official CPI, although directionally, the pressures are comparable. A marked divergence persists between price gains in Lagos (where food prices rose 10.4 per cent year-on-year in April, according to the SC-PCPT) and in Kano (which saw more subdued pressure, with food prices rising 3.5 per cent year-on-year).”

    She said raising revenue is more difficult at a period of weak growth, when the economy must contend with delayed budget implementation, poor investor’s confidence because of the low oil-price environment, a banking sector with little appetite for new lending as it grapples with legacy oil and gas exposures and the risk of rising non-performing loans.

    “Not least, a growing informality to the economy, as well as a weaker trade performance, might threaten the revenue-raising effort. “The situation is nonetheless worrying. In late April, President Muhammadu Buhari ordered the release of some of Nigeria’s strategic grain reserves in order to reduce the pressure on food prices. Our SC-PCPT survey suggests that forex restrictions, imposed by the CBN on some imports in June 2015, may still be having an impact on prices.

    “Since last June, 22 out of 25 of the food products surveyed, which are subject to FX restrictions, have seen price increases. By April, roughly half of these items, 12 out of the 25 products, were still experiencing month-on-month price gains, suggesting that the forex restrictions are still helping to drive prices higher. Pressure was especially evident in the ‘rice’ and ‘tomato paste’ sub-categories,” she said.

    The economy is facing its worst crisis in decades fueled by the collapse in crude prices, which has slashed government revenues, weakened the currency and slowed growth. The economy grew 2.8 per cent last year, its slowest pace in decades.

    Food prices, which account for the bulk of the inflation basket, rose by 1.4 per cent points to 12.7 per cent in March, the National Bureau of Statistics (NBS) said on its website. “The higher price level was reflected in faster increases across all divisions,” NBS added.

    The NBS expects inflation to end the year at 10.16 per cent, above the central bank’s target upper limit of nine percent. The price index ended at 9.55 per cent last year.

     

  • Manufacturers seek 3% interest rate reduction

    Manufacturers seek 3% interest rate reduction

    The Manufacturers Association of Nigeria (MAN) has canvassed a reduction in interest rate to between three and five per cent. The prevailing rate does not support the government’s economic diversification drive, it said.

    MAN President Dr. Frank Udemba Jacobs, who spoke during the week on the sideline of the association’s Council in Lagos, said: “One of the challenges we have is funding.We are concerned with the high interest rate that banks charge manufacturers. Government is serious about diversification but they cannot diversify at this current rate. We hope the government will reduce the rate to three to five percent.”

    He condemned multiple taxation, insisting that it is wrong for companies moving goods from one place to another to pay the same tax in every local government. He said there should be a one-stop-shop where taxes are paid.

    Jacobs recalled his recent discussion with Central Bank of Nigeria (CBN) Governor Godwin Emefiele, where he (Emefiele) made good his promise to make further concessions for manufacturers in foreign exchange (forex) allocation.

    “Apart from the 41 items that are not valid for forex, all the 10 sectors said that they have been getting forex allocations now. I want to report to you that CBN has been allocating foreign exchange to some of our members now,” he stated.

    Jacobs urged the government to hurriedly assent to the budget to ensure its full and timely implementation.

    “We are happy that a huge sum was allocated to infrastructure in the budget, which is a major bane of industrialisation. Energy is still a major problem for manufacturers and railways that should be conveying goods at  relatively cheap costs are still not there. It is our hope that when its full implementation starts, some of these challenges will be addressed,” he said.

    On the lingering fuel crisis, Jacobs stated that it has had a huge impact on the economy, noting that when factories cannot get fuel, they will not produce and it will  create problems.

    Jacobs also maintained that the widely held belief that locally-made goods are inferior to imported ones is  wrong, pointing out that for a manufacturer to be a MAN member, the products of such a firm must meet acceptable standards.

    He further said MAN has signed a Memorandum of Understanding (MoU) with the Standards Organisation of Nigeria (SON) to ensure quality standards.

    “We have MoU with SON, such that any MAN member must ensure that any product they make in Nigeria meet standards. Similarly, those in food and drugs have MoU with National Agenda for Food, Drug Administration and Control (NAFDAC), which has quality parameters they have to meet. So no manufacturer who is a member of MAN can produce substandard products,’’ he clarified.

    The MAN chief expressed optimism that with the media hype that is going on today about awakening the consciousness of people on the need to patronise made-in-Nigeria goods, sooner or later the attitude of Nigerians will change.

    He said before now, people enjoyed foreign goods, but the point must be made that whenever anybody patronises any imported good in favour of the locally manufactured one, the nation exports employment and imports unemployment.

    The MAN boss lamented the closure of many companies, attributing it to lack of power supply.

    “If you don’t have enough power and diesel to power your generator, or your generator gets old and you cannot replace it, chances are that you will close down the factory,” he said.

    He also identified multiple taxation, which, according to him, could force a business owner that cannot cope to close the factory. “Even the interest rate of 23 to 25 per cent can make a manufacturer close down, he added.

  • CBN Increases Interest Rate to 12% 

    CBN Increases Interest Rate to 12% 

    Four months after the Monetary Policy Committee (MPC) reduced interest rates, it has reversed its decision and increased Monetary Policy Rate or interest rates bank lend money to 12 percent.

    Addressing journalists at the end of the two days MPC meeting in Abuja Tuesday, the governor of the Central Bank of Nigeria (CBN) Mr Godwin Emefiele said “the Committee, in its assessment of relevant internal and external indices, came to the conclusion that the balance of risks is tilted against price stability. The MPC therefore, voted to tighten the stance of monetary policy.”

    Based on this, the MPC raise MPR by 100 basis points from 11.00 per cent to 12.00 per cent; Raise the Cash Reserve Ratio (CRR) by 250 basis points from 20.00 to 22.50 per cent; retain Liquidity Ratio at 30.00 per cent; and narrow the asymmetric corridor from +200 and -700 basis points to +200 and -500 basis points.

    Before arriving at this decision, Emefiele stated that “the Bank had adopted accommodative monetary policy since July 2015 in the hope of addressing growth concerns in the economy, effectively freeing up more funds for DMBs by lowering both CRR and MPR, with excess liquidity arising from the lower CRR warehoused at the CBN.”

    Emefiele noted that Deposit Money Banks (DMBs) were to access these funds by submitting verifiable investment proposals in the real sector of the economy.

    He however lamented that “the funds have not impacted the market yet because the CBN was still processing some of the proposals submitted by the DMBs. In the first episode of easing which resulted in injecting liquidity into the Banking system, DMBs did not grant credit as envisaged.”

    The CBN governor added that, “the delay in passage of the 2016 Budget has further accentuated the difficult financial condition of economic agents as output continues to decline due to low investment arising from weak demand.”

    “The cautious approach to lending by the banking system underpinned by a strict regulatory regime conditioned by the Basel Committee in the post global financial crisis era has further alienated investors from access to credit as banks prefer to build liquidity profiles in anticipation of government borrowing,” he said.

    The Committee noted that the sluggish growth in output was partly attributable to “certain fiscal uncertainties, which inadvertently hampered investment spending and flows; intermittent fuel scarcity, increased energy tariffs (without commensurate improvement in power supply), foreign exchange scarcity as well as slow growth in credit to private sector in preference to high credit growth to the public sector.”

    The Committee noted that many of these factors were outside the control of monetary policy and given these limitations, in the absence of complementary fiscal and structural policies, the only option was to continue with the existing measures.

    The MPC Emefiele said “believes that complementary fiscal and structural policies are essential for reinvigorating growth.”

    The Committee reiterated its commitment to maintaining a stable naira exchange rate stressing that it “ took note of the high level of activity in the autonomous foreign exchange market as well as the rising demand in the interbank market but observed that the data on demand for foreign exchange had become ‘very noisy’, being overshadowed by speculative demand.”

    However, the Committee charged the CBN “to speed up reforms of the foreign exchange market to improve certainty and eliminate noise and opportunities for arbitrage.”

    On the monetary front, Emefiele, said, “the wider economy appears starved of the needed liquidity to spur growth and employment. Recent performance of the monetary aggregates lends credence to this fact.  With the exception of credit to government, growth in all the monetary aggregates remained largely below their indicative benchmarks, yet; headline inflation spiked to 11.38 per cent in February 2016, substantially breaching the policy reference band of 6 – 9 per cent.”

    The increase in inflation he said “was driven not so much by liquidity, but by structural factors such as fuel scarcity, increased electricity tariff, persistent insecurity, exchange rate pass through and seasonality of agricultural produce.”

    Emefiele warned that “the conflicting signals from slowing growth and rising inflation present a difficult policy challenge.”

    The CBN governor noted the limitations of monetary policy in influencing the drivers of the current price spiral, which led the Committee to stress the need to urgently address the key sources of the pressures. In this regard, the Committee reaffirmed its commitment to closely monitor the development while working with relevant authorities to address the structural bottlenecks.

    The Committee also enjoined the relevant agencies to speed up passage of the 2016 Budget in order to halt the depressing effect of the uncertainty that engulfs the waiting period, hoping that the implementation of the budget would go a long way in boosting business confidence, and reinvigorating the financial markets. In the circumstance, the Committee urged the Bank to continue to upscale its surveillance of the financial system with the aim of promptly detecting and managing vulnerabilities to ensure sustained stability.

    When asked what will happen to the $20 billion in some individuals’ domiciliary accounts, Emefiele said the money was not sitting idle in the banks but were being used by the banks to fund assets on the other side of the balance shot and constitute a liability in the banks’ balance sheets.

  • CBN may leave interest rate at 12% till October

    Those expecting an immediate cut in the Monetary Policy Rate (MPR), may be disappointed.

    Findings by The Nation indicated that although the new Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, promised rate cut, it may not take effect until about October.

    Currencies analyst at Ecobank Nigeria Olakunle Ezun said in an emailed report that the Governor’s forward guidance to a low interest rate environment showed a clear departure from his predecessor’s era of a significantly tight policy stance.

    He argued that assuming no significant change to key indicators, the MPR would likely be held at 12 per cent through September before any cuts are made. He said this was because of reasonably strong liquidity growth, fiscal expansion prior to the February 2015 elections, and the potential risks to Nigeria arising from the normalisation in US monetary policy.

    The MPR is the benchmark rate by which the CBN determines interest rate.

    Emefiele had said the CBN under his leadership, would pursue a gradual reduction in interest rates. He said a comparison of selected macroeconomic aggregates from some emerging market countries including South Africa, Brazil, India, China, Turkey, and Malaysia showed that Nigeria has one of the highest T-bill rates.

    “Such high rates create a perverse incentive for commercial banks to simply buy virtually risk-free government bonds rather than lend to the real sector,” he said.

    The CBN boss said that to enhance financial access and reduce borrower cost of credit, the lender would pursue policies targeted at making Nigeria’s T-bill rates more comparable with other emerging markets and by extension, pursue a reduction in both deposit and lending rates.

    “While a reduction in deposit rates would encourage investment attitudes in savers, a reduction in lending rates would make credit cheaper for potential investors,” he said.

    Emefiele said since 2012, the CBN has maintained a tight regime of monetary policy, with the MPR and the Cash Reserve Requirement (CRR) mostly remaining unchanged at 12 per cent. The CRR on public sector deposits was however raised to 50 per cent in July, 2013 and subsequently to 75 per cent in March 2014 when the CRR on private sector deposits was also adjusted upwards to 15 per cent.

    He said this is meant to address the liquidity effects of the Federation Account Allocation Committee’s (FAAC) statutory allocations to the three tiers of government and the redemption of the Asset Management Corporation of Nigeria (AMCON) bonds towards the end of 2013, the effects of which lingered into this year.

    “The CBN would also begin to include the unemployment rate as one of the key variables considered for its Monetary Policy decisions. In the interim, we would continue to maintain a monetary policy stance, reflecting the liquidity conditions in the economy as well as the potential fiscal expansion in the run-up to the 2015 general elections,” he said.

  • CBN retains interest rate at 12%

    CBN retains interest rate at 12%

    The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has unanimously voted to retain the current stance of the Monetary Policy Rate (MPR) at 12 per cent.

    The body also opted to keep the Cash Reserve Ratio (CRR) on public sector deposits at 75 per cent and CRR on private sector deposits at 15 per cent; while also retaining the MPR corridor at +/-200 basis points.

    This disclosure was made on Tuesday by the Acting Governor of the CBN, Dr. Sarah Alade, at the end of the 95th Monetary Policy Committee (MPC) meeting of the apex bank in Abuja.

    Alade also revealed that Nigeria’s gross official external reserves has grown to US$38.30 billion as at May 15 compared to US$37.40 billion at end of March and US$42.85 billion as at  December 2013.

    She noted that the current level of the country’s external reserves could provide approximately nine months of imports cover.

    On the 12 per cent interest rate, the Acting CBN Governor said, “the committee noted with satisfaction Nigeria’s overall domestic economic environment which has remained stable with inflation contained within the target range, the recent stability in the foreign exchange market, stable interbank rates and strong growth outlook.”

    The key challenge for the policy, in the Committee’s view, she added “was that of sustaining and deepening the outcomes of existing policies.

    The key risk factors, according to Dr. Alade, include the high systemic banking system liquidity, elevated security concerns and anticipated high election-related spending in the run-up to the 2015 general elections.

     

     

  • Manufacturer demands single digit interest rate

    Manufacturer demands single digit interest rate

    The Federal Government has been urged to mandate the Central Bank of Nigeria (CBN) to put in place strategic framework that will enable banks resume normal lending to the real sector at single digit interest rate to avert further strangulation and total collapse of business activities in the economy.

    Speaking with The Nation in Lagos, the Group Executive Director Golding Hamed Holdings, Chief Adebayo Hamed also urged the government to restructure all export-related agencies to take further stimulus measures and support industries to expand export in the country.

    He urged the government to introduce new incentives and faithfully implement existing concessionary duty rates on raw materials not available in the country.

    On energy supply to industries, he bemoaned what he called the recurring debacle of unavailable and un-sustainable power (energy), which has prevented the manufacturing sector to attain its full capacity and operate optimally. He said the cost of sourcing for alternate power, swells operational cost, leaving an insignificant profit margin for the manufacturers.

    He said: “The government should also ensure the immediate crafting of a national policy on gas pricing that will eliminate monopoly and reduce the number of beneficiaries on the value chain as quick wins that will improve the lot of manufacturing concerns and cushion the effect of the seemingly intractable business environment.”

    He affirmed that what qualifies a nation for the tag ‘developed economy’ is the presence of a virile manufacturing sector, adding that Nigeria would remain in the community of developing countries except the enabling environment required for manufacturing to thrive is created.

    He urged the government to urgently consider some of the issues militating against manufacturing and put in place a mechanism that will bring down the cost of doing business and enhance trade facilitation.

  • CBN won’t reduce interest rate for now, says Sanusi

    Central Bank of Nigeria Governor Mallam Lamido Sanusi has ruled out a cut in interest rate in the near future.

    He said doing so would have dire consequences on the economy.

    Briefing reporters on the sidelines of the just concluded World Bank/IMF Annual Meetings in Washington DC, Sanusi said a reduction in the Monetary Policy rate would result in an inflationary spiral and put pressure on the naira at the foreign exchange market.

    Acknowledging the agitation for a cut to ease borrowing costs within the economy, the CBN governor said that the monetary tightening was the price to pay for financial system stability, which is the core mandate of the apex bank.

    The retention of the MPR at 12 per cent for almost three years has become a sore point for real sector players who insist that the time was ripe for some monetary easing, now that inflation was in single digit.

    Sanusi, however, said that it was easy to reduce rate by printing more money but with inflation under control and the naira holding steady relative to other emerging market currencies there is no reason to consider easing.

    “We have stability that is very easy to take for granted. In 2009, when I became CBN governor, inflation was 15.6 per cent, the stock market had lost 70 per cent of its value, one third of the banks were about to collapse. The official exchange rate was N145 at the BDC it was being sold at N190. It is very easy when you have established stability for people to start screaming that you are holding policy too tight.

    “You have had a stable exchange rate for two years; we have brought inflation from 15.6 percent to 8.2 going to below eight in December.

    “The stock market has been up 30 per cent between December and now and people are complaining. You want lower interest rates? Where do you want the naira? 180,190? Where do you want inflation rate? 13, 14 per cent? I can deliver interests rates of seven per cent if you want today; it is just to print money. The Fed (US central bank) has delivered zero, it is easy. Print the money, the interest rate crashes, but where do you want your naira? People want a stable exchange rate, they want to have reserves; they want to have low inflation and they want to have low interests rates? I am not a magician.”

    Sanusi, however, affirmed that when the bank is satisfied that conditions are conducive, it will consider easing, but for now, “it has to keep its eye on the ball.”

    “If you look at the CBN Act, our objectives are very clear, we are given responsibility for price stability, for protecting the external value of the naira, which is exchange rate stability, for maintaining the reserves of the country and for financial system stability. We have to keep an eye on the ball.

    It is very easy to call the shots from the sidelines. Supposing I decide today to lower the rate of interest, which is print more money, a number of things will happen. Maybe inflation would go up, exchange rate weakens.

    “Now once the foreign portfolio investor believes the naira is going to be weak and he is therefore going to lose money, remember he bought in dollars, and then you are going to wipe out his profit by basically changing the exchange rate, everybody decides to run out of Nigeria. Then the naira crashes from N160 to N180 or N190 and the stock market crashes and the people who are holding shares default on their loans and the banks get into problems” he added.

    The CBN governor also explained reason for the clampdown of Bureaux de Change operators and the ban on importation of dollars by banks, pointing out that there were a lot of abuses going on in the system that were hurting national interests.

    He said some BDC operators in Kano were found to be buying dollars from Nigerian bank and taking the cash to Saudi Arabia to sell.

    While he pointed out that there was no law limiting the amount of foreign exchange people could take out of Nigeria, those in that trade should buy their dollars elsewhere.

    He also reacted to complaints by Nigerians in the Diaspora over the new policy that compel banks to pay Western Union and Monogram cash remitted from abroad to beneficiaries in naira instead of dollars, insisting that this was the standard practice.

    Sanusi said the CBN had allowed dollar payments because banks had been cheating beneficiaries by offering low rates but that with the current situation, the CBN had decided to review the position.