Politics
Nigeria’s suspended Central Bank governor, Lamido Sanusi, could have the last laugh
Public reaction has continued to be polarized, with counter accusations coming from the government quarters on the financial recklessness of the suspended governor. While some see the suspension as a welcome development, others see Sanusi as a hero bold enough to stand against corruption.
Naira under pressure
The reaction of the market was sharp and decisive. The foreign exchange rate market immediately depreciated, by over 2% on the day of the announcement, though it rebounded by 1% a day later. In reaction to the depreciation of the naira, the deputy governor in charge of economic policy, Sarah Alade who has been appointed acting CBN governor, reassured Nigerians of the bank’s intention to continue to defend the naira and maintain stability in monetary policy.
But investors and speculators have continued to increase their dollar holdings in anticipation of a devaluation of the naira. The Lagos Stock Exchange, which had already slumped in January, also dipped, before recovering. The CBN’s major goal is to maintain Nigeria’s macroeconomic stability. And there has been significant stability in the economy between 2010 and 2013.
Overall, GDP growth grew by 6.87% in 2013 up from 6.58% growth in 2012, according to the CBN. This was supported by the moderation in inflation which narrowed to a single digit of 9.3% percent by end 2013. Added to the stable price regime is the relatively stable exchange rate, achieved by the CBN’s tight monetary policy stance. However, there are ongoing concerns on the continous decline in the country’s external dollar reserves, which fell 2.24% in 2013.
There is also continuing underperformance of oil production in the face of high international oil prices, alongside ongoing depletion of Nigeria’s excess crude account, a fund fed by profits from the state’s oil interests. It fell a whopping 72% in 2013 as the table below shows.
