29 June 2014

Nigeria: External Reserves in Modest 0.83 Percent Rise, Hits U.S. $37.23 Billion

Kaduna — Almost one month into his five-year tenure, Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN), may have lived true to his resolve to raise the nation's external reserve pool.

Latest data for the month of June, published by the apex bank, shows that as of Thursday, June 26, 2014, Nigeria's reserves stood at $37.23 billion, representing a rise of about $308.963 million or 0.83 per cent month-to-date, from the $36.959 billion reported at the end of May.

Except there is a negative swing in the last four days of the month as would become evident in the coming days, external reserves may closed for the month in positive territory.

The June data, so far, is a contrary to the situation in the month of May, when the nation's reserves fell by a significant $1.178 billion or 3.09 per cent, from $38.138 billion at the end of April.

The June-to-date data is akin to the situation in April, when reserves grew by a slim $314.472 million or 0.83 per cent from $37.834 billion at the end of March.

Addressing a world press conference in Abuja, days after he resumed office, Emefiele promised to partner relevant stakeholders to aggressively shore up Nigeria's reserves and improve policy buffers. This, he said, will further create space to implement monetary policy using available instruments.

He put a smile on the faces of real sector operators, when he pledged a gradual reduction in interest rate regime to ensure cheaper borrowing.

This, he said, has become necessary going by a "comparison of selected macroeconomic aggregates from some emerging market countries including South Africa, Brazil, India, China, Turkey, and Malaysia (which) indicate that Nigeria has one of the highest T-bill rates.

"Such high rates create a perverse incentive for commercial banks to simply buy virtually risk-free government bonds rather than lend to the real sector," he said.

To enhance access to cheaper funds, he said the CBN "would pursue policies targeted at making Nigeria's T-bill rates more comparable with other emerging markets and by extension, pursue a reduction in both deposit and lending rates. While a reduction in deposit rates would encourage investment attitudes in savers, a reduction in lending rates would make credit cheaper for potential investors."

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