https://www.engineeringnews.co.za
Africa|Building|Financial|Fire|Gas|Industrial|PROJECT
Africa|Building|Financial|Fire|Gas|Industrial|PROJECT
africa|building|financial|fire|gas|industrial|project

Nigeria central bank to defend reserves in wake of $9bn court ruling

19th August 2019

By: Reuters

  

Font size: - +

Nigeria's central bank will strive to protect the country's currency reserves after a British court ruling granted a small natural gas firm the right to try to seize $9 billion in assets from Nigeria's government, the bank's head said on Monday.

Such a sum would be one of the largest financial liabilities imposed on Nigeria in its history, representing 20% of the currency reserves of Africa's largest economy and top oil producer.

Central bank chief Godwin Emefiele said Nigeria had sufficient grounds to appeal the ruling, over an aborted gas project in the southern Nigerian city of Calabar, made on Friday in favour of Process and Industrial Developments.

"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," Emefiele told reporters in the capital, Abuja.

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% a year ago. As yields have fallen, foreign inflows have slowed, in turn leading to a shortage of dollars and hurting the naira.

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, his spokesman said.

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

UNCONVENTIONAL TOOLS
"FX pressures have intensified as global risk-off sentiment incentivises some portfolio reversals, and the UK judgment could add further fuel to the fire," said Cobus de Hart, senior economist at South Africa's NKC African Economics.

On Monday, traders were seeking higher rates for one-year treasury bills as the naira weakened, and bid-offer spreads doubled in volatile trades.

The naira has been quoted at 364 per dollar for foreign investors since last week from 363.50, as liquidity dried up on the forex market.

Nigeria operates a multiple exchange rate regime that it has used to manage pressure on the currency.

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.

"Worryingly, the central bank is employing unconventional tools more regularly to try and keep the naira stable and safeguard reserves, and risk exists ... which could ultimately come at the cost of slower growth and higher inflation," De Hart said.

Edited by Reuters

Comments

Latest News

Magazine video image
Magazine round up | 29 March 2024
29th March 2024

Showroom

AutoX
AutoX

We are dedicated to business excellence and innovation.

VISIT SHOWROOM 
Schauenburg SmartMine IoT
Schauenburg SmartMine IoT

SmartMine IoT has been developed with the mining industry in mind, to provides our customers with powerful business intelligence and data modelling...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.115 0.166s - 159pq - 2rq
Subscribe Now