Central bank urged to act on weakening Naira
from OKORO CHINEDU in Lagos, Nigeria
LAGOS – AN international economic think-tank urged the Central Bank of Nigeria (CBN) to urgently address the prevailing liquidity imbalances.
The call by Rand Merchant Bank (RMB)in its Global Markets update on
Wednesday came amid the Naira continuing to weaken as importers scurried to trim their currency exposures amid concerns over the dwindling oil price.
The interbank market is struggling to contend with the level of demand despite a few month-end US dollar sales by major oil conglomerates.
According to RMB, a dearth of portfolio inflows has aggravated the liquidity situation as investors shy away from the local capital markets amid fears of possible currency devaluation.
“The current liquidity imbalance requires the CBN’s immediate attention,”
“The central bank will seek to stabilise the naira to limit the pass-through to inflation.
“However, its ability to affect the foreign exchange market could be limited by its international reserve position, which is more than 20 percent lower than in fourth quarter 2008 when the international oil price slumped to US$46/barrel.”
RMB added it had long held that an “oil event” such as lower oil prices or
production levels would provoke the CBN to adjust its official reference
“In light of recent happenings, we are reviewing our year-end forecasts and assessing the magnitude of adjustment required to meet the government’s forecasted oil revenues.”
– CAJ News
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