CBN warns against speculative attack on naira, retains MPRat 13%

The Central Bank of Nigeria (CBN) yesterday warned that it
would not tolerate speculative attack on the naira just as it
retained the Monetary Policy Rate (MPR) at 13 per cent and
the Cash Reserve Requirement (CRR) on private sector
deposit at 20 per cent.
It also retained the CRR on public sector deposit at 75 per
cent with liquidity ratio at 20 per cent.
Addressing newsmen shortly after the Monetary Policy
Committee (MPC) meeting of the CBN, in Abuja, the CBN
Governor, Mr Godwin Emefiele, restated that the apex bank’s
mandate was to defend the external reserves and the
exchange rate and so will not tolerate speculative attack on
the currency.
Referring to the news by the JP Morgan’s index team to place
Nigeria on a negative watch for the next three to five months
because Nigeria’s foreign exchange and local bond market is
illiquid, he took exception to the assertion and affirmed that
the bond market was liquid.
“I want to first of all respond to the news by the JP Morgan’s
index team to place Nigeria on a negative watch for the next
three to five months because of their assertion that the
foreign exchange and the local bond market is illiquid. I had
responded to this by saying that we disagree with this
assertion that the market is not liquid
There was intra NOP trading during that period. But what we
always insisted was that the banks must close their positions
to zero because of the volatility that we saw in the market on
exchange rate and we taught that we could not allow that to
continue because we also discovered certain uncomfortable
tendencies in the market which portend that there was
speculative attack on the currency. That was the reason we
took that decision.
And when we took that decision we were very clear that the
position was being reviewed to zero at that time in the interim
and that we will be monitoring the market.
And I will like to seize the opportunity to repeat myself. It is
not cast in stone. We will continue to review the position. It is
possible that even after this pronouncement, that as we will
review the situation and we look at the level of liquidity in the
market and we feel comfortable with what is happening in the
market vis a vis the uncomfortable activities that we see in the
market, we may come up tomorrow to review the next open
market further upwards. We repeat that we have a
responsibility in line with our core mandate to defend the
currency and exchange rate of the naira. We have also made
it very clear that we are monitoring the market to the extent
that we feel that the inter-bank market will continue to
support trading activities of both Nigerian and foreign
investors and that at any time when we discover that the
market is unable to absorb or provide the liquidity that is
needed that the CBN will come up to intervene in the market
to provide the liquidity that is needed for transactions to go
on for legitimate transactions. I repeat, for legitimate
transactions. We have the mandate to ensure that
transactions taking place are only for legitimate transactions.
So, we are looking at it and we are engaging the JP Morgan
index team to provide our numbers to prove the level of
liquidity. And I am very optimistic that they will see reason
with us. Let me repeat myself. We are committed to remaining
on the index. We will do everything possible to remain on the
index because we know the adverse impact that the exclusion
from the index will cost the country. In fact, what is
paramount in our mind was that the external reserve must be
defended. The exchange rate policy must be defended. We
must ensure that everybody’s activities must continue to take
place. Anybody who needs foreign exchange to transact
business in the country will be allowed to do so but for
legitimate purposes. But we will not tolerate speculative attack
on the currency” he warned.