Politics
New challenges for Nigeria’s new central bank chief, Godwin Emefiele
Repeated intervention by the central bank to keep the naira within the band has run down foreign exchange reserves, and liquid reserves have declined by about $6.53 billion or 18.2 percent from $42.46 billion at the start of 2014. That is a burn rate of about $44 million a day and raises the prospect that interest rates, which have been on hold at 12 percent since October 2011, may have to rise at some point.
Analysts expect Emefiele to be more discreet than Sanusi, who was often criticised by government officials for going far beyond his remit with his criticisms of government spending. Banking sources describe Emefiele as a conservative figure who appears confident in public but gives little away.
Monetary policy choices may be limited. He could raise the policy rate, which would prop up the naira and attract investors to domestic debt but hurt lending, or devalue the naira band. Devaluation, however, would put pressure on the country’s banks as it would lift principal and interest payments on Nigerian government and corporate Eurobonds.
Copyright The Africa Report 2014
