CBN strive to defend currency reserves, UK $9bn court ruling

The Central Bank of Nigeria, CBN, has said that it will strive to protect the country’s currency reserves after a British court ruling granted Process and Industrial Developments Limited, a natural gas firm, the right to seize $9 billion in assets from Nigeria’s government. 

CBN building

According to Reuters, such a sum would be one of the largest financial liabilities imposed on Nigeria in its history, representing 20 percent of the currency reserves of Africa’s largest economy and top oil producer. 

The CBN Governor, Mr. Godwin Emefiele, said Nigeria had sufficient grounds to appeal the ruling, over an aborted gas project in Calabar, Cross River State. Emefiele said, “We know that the implication of that judgment has some impact on monetary policy, and that is why the Central Bank is going to step forward and defend the reserves.” 

Pressure has been building on the Naira as oil prices drop and foreign investors lock in their profits on local bonds as yields have fallen from as high as 18 percent a year ago. With yields declining, foreign inflows have slowed, in turn leading to a shortage of dollars and hurting the Naira across the various segments of the foreign exchange market. In a further sign of pressure on the currency, President Muhammadu Buhari, last week told the Central Bank to stop providing funding for food imports.  

However, Emefiele, did not say what other measures the apex bank might take to defend the country’s currency or its foreign exchange reserves. 

Reuters quoted a senior economist at South Africa’s NKC African Economics, Cobus de Hart, as saying, “FX pressures have intensified as global risk-off sentiment incentivises some portfolio reversals, and the UK judgment could add further fuel to the fire.” 

Reuters said yesterday, foreign exchange dealers were seeking higher rates for one-year treasury bills as the Naira weakened, and bid-offer spreads doubled in volatile trades. 

Last week, Emefiele met fund managers in London in a roadshow arranged by South Africa’s Standard Bank following its second debt auction that week, where the Central Bank told dealers to raise rates to lure foreign investors. 

Emefiele sought to reassure investors who were focused on the oil price and the bank’s policy on debt sales, saying that the currency would continue to be stable.