21 February 2014

Nigeria: Markets Respond Negatively to Sanusi Sacking

Photo: Leadership
Lamido Sanusi

Lagos — FURTHER pessimism is projected for the local markets following the controversial suspension of Central Bank Governor, Lamido Sanusi.

His suspension on Thursday has thrown local financial markets into complete disarray, with the Nigeria Stock Exchange shedding 1.47 percent on the day President Goodluck Jonathan's decision was announced.

“We foresee an exodus of foreign investors from the fixed income market upon its opening, as doubts over the lawfulness of the president's decision aggravate market uncertainty,” Rand Merchant Bank (RMB) Global Markets stated on Friday.

RMB argued the reopening of the forex market was questionable in view of the rapidity of naira depreciation shortly after the announcement.

Having eased to US$D/Naira 164 after the CBN's weightier offering of US dollars at its biweekly auctions on Monday and Wednesday, the local unit surrendered 3 percent to the US dollar within hours of the presidency's disclosure.

The think-tank questioned the manner in which the suspension of Sanusi was handled.

“The manner in which his suspension was communicated to the market — via a Twitter posting of an official statement from the Special Advisor to the President — does not necessarily embody good faith and is likely to have accelerated speculation against the naira rather than quell market fears.

"Although the president has the prerogative to suspend the central bank governor using his executive powers under Section 11(2) of the CBN Act of 2007, the legality of the decision is being interrogated by Nigeria's House of Representatives, which deemed the undertaking as unconstitutional.

"Sanusi stressed that the matter must be referred to the courts to ensure that the independence of the central bank is maintained and the process of appointing a successor is trustworthy.”

RMB nonetheless took comfort in knowing that someone from within Sanusi's inner circle, Sarah Alade, was at the helm of the central bank as she should stay the course with regard to exchange rate management.

“We doubt that there will be a departure from the MPC's tight monetary policy stance during Alade's brief term as governor but it is hard to know whether the president's preferred candidate, Godwin Emefiele, will effect major policy changes once he assumes control of the apex bank.

"Whether one believes that yesterday's pronouncement is politically motivated or justified in terms of recent naira movements, one thing's for certain, major changes are underway in the Nigerian economy,” stated RMB.

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