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Monday, 4 January 2016

I won’t devalue naira – Buhari

PRESIDENT Muhammadu Buhari said, Wednesday, in
Paris, France, that he opposed a further weakening of the
naira and openly endorsed the Central Bank of Nigeria,

CBN’s policy of restricting foreign-exchange trading.
The President, who was answering questions in an
interview with France 24 broadcast, said: “I do not think
it is healthy for us to get the naira devalued. The Central
Bank is providing ample foreign exchange to essential
services, industries.”
CBN has been under pressure from foreign investors to
further devalue the naira. Nigeria had, last year,
devalued the naira to N197 to the dollar from N160. The
naira was further adjusted slightly in July to N199 to the
dollar. As a result of the continued pressure on the
naira, CBN introduced some measures to curb the
excess demand for foreign exchange.
This, however, did not go down well with some of the
foreign investors. After the crash of oil prices last year,
the CBN Governor, Mr. Godwin Emefiele, reacted to the
naira’s drop to a record low in February by extending
trading curbs and introducing bans on purchases of
dollars by 41 items, which CBN said cannot access
foreign exchange from the Nigeria market.
CBN, JPMorgan clash
The naira has since stabilized at the inter-bank market,
but foreign investors, local businesses and even some
members of CBN Monetary Policy Committee have
complained that the naira is overvalued.
Reacting to these measures put in place by the CBN,
JPMorgan excluded Nigeria bonds from its bond index.
Reacting to JPMorgan’s decision, CBN’s Debt
Management Office and the Ministry of Finance, in a
joint statement, said: “It will be recalled that Nigeria was
included in the index in October 2012, based on the
existence of an active domestic market for FGN Bonds
supported by a Two-Way Quote System, dedicated
market makers and diverse investors.
“However, in January 2015, JP Morgan placed Nigeria
on an Index Watch as a result of their concerns in the
operations of our Foreign Exchange, FX, market, namely
lack of liquidity for transactions, lack of transparency in
the determination of the exchange rate and lack of a
fully functional two-way FX market.
“In our continuous bid to strengthen the Nigerian
financial market and enhance our status as a preferred
destination for investors, we took measures to improve
the market.
Despite the fact that oil prices have fallen by nearly 60
percent in one year, which should expectedly reduce the
amount of liquidity in the market, CBN ensured that all
genuine and effective demands were met, especially
those from foreign investors.
“On transparency, CBN mandated that all FX
transactions were posted online in the Reuters Trading
Platform so that all stakeholders can easily verify all
transactions in the market.
In addition, the official FX window at CBN were closed to
ensure a level-playing field in the pricing of foreign
exchange. It is important to note that a functional two-
way FX market already exists in Nigeria.
CBN justifies regulation
“However, given the high propensity for speculation,
round tripping, and rent-seeking in the market, it
became imperative that participants are not allowed to
simply trade currencies, but are only in the market to
fulfill genuine customer demands to pay for eligible
imports and other transactions.
“In the light of this, we introduced an order-based, two-
way FX market, which has resulted in the stability of the
exchange rate in the interbank market over the past
seven months and largely eliminated speculators from
the market.
“Despite these positive outcomes, JPMorgan would
prefer that we remove this rule, even though it is
obvious that doing so would lead to an indeterminate
depreciation of the naira. With dwindling oil prices, we
believe that an order-based two-way market best serves
Nigeria’s interest at the moment.
“While we would continue to ensure that there is
liquidity and transparency in the market, we would like
to note that the market for FGN Bonds remains strong
and active due, primarily, to the strength and diversity
of the domestic investor base.
“For the avoidance of doubt, the Federal Government
sees Nigeria and the interest of Nigerians as paramount.
It will, therefore, only continue to take economic
decisions that will impact positively in the lives of all
President Buhari also said in the interview that markets
were not being harmed by the delay in ministerial
appointments, which he says will happen by the end of
the month.
He said: “Work is being done by technocrats; they are
there and they provide the continuity.”
The naira remained little changed at 199.05 per dollar
on the inter-bank market at in Lagos


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