The country’s Monetary Policy Committee (MPC) raised its benchmark lending rate on Tuesday to 13 per cent from 12 per cent as well as devalued the naira by 8 per cent to 168 to the dollar and also raised the private sector Cash Reserve Requirement (CRR) to 20 per cent from 15 per cent. The MPC made this move in order to defend the naira as well as stem losses to its foreign reserves that is down almost two billion US dollars.
“Developments in the international oil market have intensified the risks and vulnerabilities faced by oil exporting countries in the wake of a new episode of falling oil prices. The uncertainty is complicated by the absence of clear signals on how far and how long this episode would last,” the Central Bank of Nigeria said.
The country’s central bank has been selling dollars in order to support the naira which has been affected by the drop in global oil prices and has fallen significantly against the dollar this year. After devaluation the naira’s year to date is stronger by 10.6 per cent.
“The central bank has tried quite hard to show it is serious about defending the new currency level,” Charles Robertson, global chief economists at Renaissance Capital told CNBC Africa.
According to Robertson, the move by the central bank has an overall negative impact for the banks.
“There is recognition when it comes to the naira, there is the markets themselves, perhaps the local banks are being pressured by these measures. There will be less liquidity available, it will be less easy for bets to be made against the naira,” Robertson noted.
Despite the dwindling of oil prices and the naira, the country’s National Bureau of Statistics (NBS) has indicated that the country’s economy will continue growing at a steady path.
Noting the country’s impressive growth, the committee noted, “That the continuing insurgency in the North East of Nigeria in combination with other risks could adversely affect the growth outlook.”