Emefiele takes strong Naira stance as senate confirms him new CBN governor

Incoming Central Bank of Nigeria (CBN) governor, Godwin Emefiele yesterday took a strong stance in favour of the naira, as the Senate confirmed him. Emefiele has indicated that the CBN’s exchange rate policy was correct and that a devaluation of the NGN would be devastating for the import-dependent economy, a development analysts regard as a positive, as he will not depart from the CBN’s $/N stability stance. Promptly confirmed by the Senate yesterday, Emefiele is expected to bring sanity and calmness into the financial services industry, analysts said last night. Besides, the coming on board of the conservative banker, sitting atop Zenith Bank with the lowest non-performing loans in the industry,who is also reputed for adherence to the rule of law and corporate governance, will engender confidence in both the local and foreign investor community.
This is expected to increase foreign direct inflows and reverse the dwindling fortunes of the nation’s foreign reserves. He has also promised to take measures to support the naira which has remained under pressure for quite sometime now, while also indicating that CBN’s exchange rate policy was correct. He told the Senators “ I am aware that the core mandate of the Central Bank of Nigeria is to achieve the monetary and price stability. Another core mandate of the CBN is to ensure that we have a strong naira and build strong foreign reserve. We are also expected to ensure that we have a strong financial system in Nigeria.” The CBN Governor designate said “ We would ensure if approved, that whatever monetary policy decision that would be taken would be those that would improve the level of employment in Nigeria because we know that employment is very important. “ We know today that we have an employment emergency in Nigeria. And we must ensure that whatever decisions we take at the CBN in the Monetary Policy Committee (MPC) would be those that would lead to improvement in the level of employment in Nigeria. “We would ensure that we work with the manufacturing companies to ensure that we improve on their level of production and by extension, ensure that we improve and achieve economic growth in Nigeria.” He said “ aside from these core mandates, we would ensure that the CBN and all stakeholders in the economy would play a central role towards ensuring that we grow the Nigerian economy. “Growing the economy of Nigeria is a very important assignment, other than just the core mandate of ensuring that we have a stable environment.” Samir Gadio, emerging markets analyst with Standard Bank, London said, “ While there was no explicit discussion about the adequate level of policy and market yields, the incoming CBN Governor’s commitment to exchange rate stability makes it unlikely that there will be official rate cuts anytime soon.” Analysts at Rennaissance Capital (Rencap) said recently when he was appointed that “Our bank analyst, Nothando Ndebele, describes him as very conservative. Under his stewardship Zenith has established itself as a leading, well-capitalised and stable bank with a high portion of assets sitting in T-bills and bonds. “We believe he is likely to maintain a firm policy environment and would be inclined to tighten policy in the current environment of naira weakness.” Hussaini Muhammed, managing director of Abuja based Muregi Associates limited said, “Central Bank as the Bankers Bank is traditionally associated with conservatism worldwide. “Therefore the incoming Governor , Godwin Emefiele would be expected to maintain that policy framework. However, I believe or will recommend that while he maintains that policy framework of conservatism, it should be done with moderation just as the immediate past U S Federal Reserve Governor, Ben Bernaike did throughout his tenure and to a large extent the current Governor Janet Yellen is expected to tow the same line of approach. It will somehow generate confidence to the overall economy and the market as a whole.” The implications of rigid adherence to the usual conservatism wouldn’t work for any emerging economy.” However, Gadio said that the key question is whether the new governor and the Monetary Policy Committee (MPC) will be ready to tighten monetary and liquidity conditions further and let the short end of the yield curve adjust to levels that trigger some renewed interest from offshore investors, adding “Given the downtrend in FX reserves and challenging fiscal and institutional outlook for the next year, the shift up in yields will become increasingly necessary.”
news source: Business Day