Vanguard (Lagos)

24 January 2014

Nigeria: State's Economy in Danger Without CBN Autonomy - - Sanusi

Governor of the Central Bank of Nigeria, CBN, Mr. Lamido Sanusi, yesterday, warned that Nigeria's economy will be greatly endangered if the independence of the apex bank was undermined.

In an interview with Bloomberg Television Africa, on the sidelines of the World Economic Forum in Davos, Switzerland, Sanusi said maintaining the independence of the bank will be a major challenge that his successor will have to contend with, saying that it is important for a strong individual to be appointed to head the bank, due to the critical role it plays in the development of the country.

He said, "Any undermining of the CBN's independence may hurt the economy. If anyone tampers with it, the markets would punish the economy.

"The CBN is a very strong institution that needs a strong leader and I think one of the things we have achieved over the last four or five years is to show that we can have an independent Central Bank in Africa.

"It is extremely important from the fiscal side, it is extremely important from the governance side, that the governor of the Central Bank is able to speak independently of political authority and raise an alarm and concerns, and give constructive criticism and advice."

In another interview with Reuters Global Markets Forum, Sanusi ruled out further devaluation of the currency, saying that the apex bank would continue to pursue a stable exchange rate policy as long as the foreign reserves can support.

He further expressed concern about Nigeria's dwindling Excess Crude Account, saying that its ability to successfully protect the naira will be based on the amount in the Excess Crude Account and the Foreign Exchange Reserve.

According to him, a stable currency is absolutely critical for price stability and financial stability in general, adding that it is not in the interest of the country to devalue the naira, because it will not have impact on the country's current account balance, given the highly inelastic nature of imports and the dominance of oil.

He said the Excess Crude Account, ECA, had now fallen to just $2.5 billion, compared with $11.5 billion a year ago, noting that until it is replenished there would be little room for a reduction in the Monetary Policy Rate, MPR, below the current 12 per cent benchmark.

He said: "We should continue to seek a stable exchange rate for as long as the reserves and monetary conditions can support this."

Sanusi said he has no fears of tightening monetary policy further to keep inflation down and to stabilize the currency, noting that, if needed, the CBN will increase its Monetary Policy Rate from 12 per cent and the Cash Reserve Requirement on public sector funds to 100 per cent.

He added that: "I don't think we are at the end of possible tightening cycles, but I do think that the scope for further tightening is getting narrower and narrower. We do need to rely more on other instruments."

He said the CBN will maintain inflation within a band of six per cent to nine per cent this year, controlled majorly by monetary conditions.

He said, "Government spending has not been huge, the real challenge has been on the revenue side and on the foreign exchange side. I see no reason why from 2015, Nigeria cannot move to within the range of South Africa's three percent to six percent, or four percent to seven percent for inflation."

Sanusi further stated that he was unconcerned by personal relationships, saying that, "We meet at work and people should do their job. I do hope that the president will be happy if I do the job very well."

Sanusi had over the years as CBN Governor, made a number of controversial statements, drawing the ire of the members of the National Assembly and the executive arm of government, when he commented on the pay package of the legislators and asked questions on the finances of the country, respectively.

It came to an head, when in September last year, he wrote a letter to the Presidency, alleging that about $49.8 billion of the country's crude oil money has not been remitted by the Nigerian National Petroleum Corporation, NNPC, to the Federation Account over a 19-month period.

The NNPC denied insinuations made by the CBN Governor in the letter, saying Sanusi is ignorant of the operations of the oil and gas sector and also playing politics with the issue.

The Minister of Finance and Coordinating Minister of the Economy, Mrs. Ngozi Okonjo-Iweala, called a joint press conference with the Minster for Petroleum Resources and the CBN to explain the controversial figure and it was established after a reconciliation meeting that it was not $49.8 billion that had not paid into the Federation Account but $10.8 billion.

However, a few days into 2014, it was reported that the Presidency, angered by Sanusi's decision to allegedly leak contents of his letter to former President Olusegun Obasanjo, asked him to resign, a request that he turned down, saying that he can not be forced out of office until June, when his tenure is expected to elapse.

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