Washington DC — Governor of Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, has said that although the current fiscal crisis plaguing the United States would affect emerging markets, he did not foresee Nigeria being adversely affected because of its current account surplus.
Sanusi, who fielded questions from journalists yesterday at the International Monetary Fund (IMF) headquarters in Washington DC, said though Nigeria was vulnerable as an emerging market, "I don't see us being badly hit."
The CBN governor said that unlike some emerging markets with deficit current account balances, Nigeria posts a surplus current account, and therefore may not be badly exposed to the adverse consequences of the US fiscal crisis, particularly the debt ceiling.
He however noted that the debt ceiling impasse may affect Nigeria, if unresolved, particularly in the area of Nigeria's reserves, which were held in US currency, as well as the bonds which were recently floated.
Sanusi said despite the fiscal crisis, he did not see the US defaulting as regards its treasury bills, adding that what could be triggered was a kind of massive austerity programme and the possibility of a default on its obligations.
"Not necessarily on the default in their treasury bills because I expect that there will be some form of prioritisation. I don't see the United States defaulting on its treasury bills as a first line of defence. But they will default in some of their obligations and no one knows exactly how the market is going to react to this. The real challenge for us in emerging and frontier markets is, we do expect that they will reach some sorts of truce within a short while.
"The government shutdown is more of a domestic issue but the debt ceiling is the one that affects all of us. We hold our reserves in the US dollars, we have invested it in US Treasury Bills and bonds and if there is a slide in those instruments, we will suffer loss in the assets that we hold. And so we expect the US to resolve this impasse in the interest of the global economy," Sanusi said, on the sidelines of the ongoing IMF/World Bank meetings in the United States capital city.
The CBN Governor said Nigeria's vulnerability was because the structural reforms in the country had not yet transited to such a level that oil was not the dominant foreign exchange earner. On the new policy against the dollarisation of the economy, Sanusi wondered why Nigeria always come up with things that are not in line with global best practices.
He argued that there was nowhere in the world where a recipient of transferred funds receives payments in foreign currency. According to him, monies sent to beneficiaries are paid in the recipient's national currency, which is the legal tender.
"The interesting thing about our country is that we intend to create things and we intend to be an island in the world. If you are in the UK and someone transfers money to you from United States, in what currency do you get paid in London? Pounds. There is nowhere in the world, where you get to your bank, because you have a transfer and insist on being paid in that currency. If you are in the UK, you get paid in pounds, if you are in Japan, you get paid in Japanese Yen and if you are in China, you get paid in Yuan. We have this sense of entitlement.
"The Central Bank did introduce this policy of asking the banks to pay dollars because there was a time the banks were cheating people, they were not giving them the exchange rate that was the right exchange rate. Now we've said the exchange rate must be the interbank rate of the date of exchange and the banks are required to display that rate in their banking halls," he emphasised.