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Nigeria: Central Bank Governor Sanusi to step down in June 2014 – investors concerned in run up to 2015 Presidential election
Nigeria’s central bank Governor Lamido Sanusi. PHOTO/File
(Bloomberg) – Nigerian central bank Governor Lamido Sanusi will be stepping down in June next year, raising concerns among investors that his success in curbing inflation and stabilizing the currency may unravel in a pre-election year.
In his 4 years in office, Sanusi, 52, overhauled a banking industry that was near collapse, cut the inflation rate to the lowest level in more than 5 years and helped to keep the currency within a narrow range. Those achievements may be threatened as government spending is set to escalate before elections in 2015.
“Sanusi has been ready to tighten monetary policy when needed,” Samir Gadio, a strategist at Standard Bank Group Ltd., said in an interview. “We are going into a presidential election in less than 16 months, so what we expect is that for the next year, fiscal policy will be significantly expansionary, and if not checked by the central bank, it could result in increased pressure on the exchange rate.”
The government of Nigeria – (Africa’s biggest crude producer), is already drawing down savings to meet its spending needs as oil production misses targets. While President Goodluck Jonathan has pledged to keep the budget deficit under control, Sanusi himself is wary, saying in an interview last month that the central bank is bracing for fiscal “shocks.” Government expenditure climbed 17 percent before the 2011 presidential election.
The key concern among investors is exchange rate stability, including a possible devaluation. The central bank has supported the Nigerian naira by selling foreign currency at twice-weekly auctions to keep the local unit within a range of 3 percent around 155 per U.S. dollar.
The Nigerian naira has dropped 1.2 percent against the U.S. dollar this year on the interbank market and was trading at 157.98 as of 2:10 p.m. (8:10 a.m. EST) in Lagos, the commercial capital. Yields on Nigeria’s naira debt maturing in January 2022 have risen 73 basis points, or 0.73 percentage points, to 12.74 percent.
President Jonathan, 56, has not given any indication yet of who will be the next governor.
