Posted by Politics X on September 2, 2009 at 4:35am
The Governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, yesterday promised to resign if the recent intervention to sanitise the financial services industry fails.The governor said this at the bi-monthly Monetary Policy Meeting, which held on Tuesday in Abuja.Mr. Sanusi, responding to insinuations that the intervention was politically motivated, said time would tell, emphasising that the primary motivation for the intervention is to protect depositors and shield the industry from collapse.Read communique hereHe also denied allegations that CBN’s action was a ploy to prepare the grounds for a take over of the banks by foreigners.It’s the economyAccording to Sanusi: “Where we are today, as far as the five banks are concerned, is that the CBN has put in money to protect depositors and creditors from any losses, to shield them from further deterioration as a result of non-performing loans. The principal objective of the action at this point in time is not to sell the banks. I have said this at several fora.”With regard to the town hall meeting held in the United Kingdom, he said it was neither to sell the banks nor to meet investors, rather he was there “to meet correspondent banking institutions and creditors, to assure them of the safety and soundness of the banking institution in Nigeria.”He added that because of the decision to change the management of the banks, the CBN needed to make itself available to international creditors, “to answer any question that might have arisen from the action we took.“The primary focus of the trip was to tell the creditors about the country’s economy and to situate our action within the context of a general process of guaranteeing financial stability,” he explained.Though, he said the CBN has not received any proposal from any prospective investor interested in any of the banks, he added that the bank will not stop any investor from expressing interest as long as it demonstrates sufficient commitment to the development of the Nigerian economy.“Once these banks have stabilised and it is time to move on, our preference is for them to have core investors that would run them professionally and put in place a governance structure that will ensure that we do not have a recurrence of the kind of things we have seen in the past. The core investor could be local or foreign.There is no law in Nigeria today that stops foreign banks from owning Nigerian banks, and the CBN will not preclude any bank from owning Nigerian banks simply because it is foreign,” he said.“That is not the same thing as saying we prefer selling our banks to foreigners. We are saying in principle that the CBN will not stand in the way of a foreign bank owning a Nigerian bank. We have stressed that any foreign bank that is coming in must be ready to show a clear commitment to the development of the Nigerian economy,” he stressed.Understanding the bailoutOn reports that some federal legislators have called the bailout illegal, saying it did not receive the approval of the National Assembly, Sanusi said he is not aware of any section of the CBN Act that demands such authorisation before the bank can perform its statutory function as lender of last resort.“What the CBN did was merely to create money to lift the balance sheets of the affected banks and increase money supply. The N400 billion loan given to the banks was (not) meant to bail them out by way of equity, but (was) a convertible facility."The CBN Act gives the CBN absolute control over the supply of money in circulation. The CBN does not need appropriation from the National Assembly to do what it did. Prior to what happened, the CBN gave these same banks and others, as a lender of last resort, money to expand their capital base."All that was done was to ask them to take the expanded facility for a longer time as quasi-capital and focus on meeting their obligations to creditors and depositors till when they are able to repay,” he said.On the monetary policy meeting, the CBN boss said the committee resolved to keep the country’s monetary policy rate unchanged at six per cent per annum, while also maintaining interest rate corridor at +/-two per cent around the MPR as well as giving approval for the establishment of an “Asset Purchase Facility Fund”.Though he said the country’s revised growth rate for last year stands at 5.99 per cent against the estimate of 6.41 per cent earlier in the year, the projection for the current year has been put at 5.33 per cent, compared to the 5.75 per cent projection.On year-on-year basis, he said the country’s inflation level has stabilised at a little over 11 per cent as at July 2009, with average rates of headline inflation and food inflation in the first seven months of the year standing at 13.11 per cent and 15.94 per cent, compared with 11.53 per cent and 15.98 per cent for last year.
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The Central Bank of Nigeria sold $162.2 million at 145.90 naira per dollar at its daily foreign exchange auction on Wednesday, as demand increased sharply to $191.74 million, traders said on Thursday. The regulator had sold $136.12 million at 145.75 …
ABUJA (Reuters) - Nigeria's new central bank governor, Lamido Sanusi, won strong approval from foreign investors when he used his first policy meeting to unveil a root-and-branch reform of the country's chaotic banking system.
Once a darling of frontier markets, Nigeria's economy -- sub-Saharan Africa's second-biggest -- faltered with the sharp decline in oil prices and the global downturn. Regulators have scrambled to defend the local currency and capital markets in Africa's most populous nation.
In its first monetary policy meeting under Sanusi, a revitalized central bank (CBN) on Tuesday slashed interest rates by 2 percentage points, lifted foreign exchange controls and guaranteed interbank transactions for the next nine months.
"There will be no half-measures when it comes to resolving Nigeria's financial sector problems and supporting growth," said Razia Khan, Standard Chartered's head of Africa research.
"The steps taken (on Tuesday), initiated by the new CBN governor who has promised to prioritise the cleanup of the financial sector, are the most promising yet."
Markets did not immediately react to the news on Wednesday as traders digested the long list of changes.
"Lending rates have not really changed and the interbank rate is still where it was," said Leke Sule, dealer at Fidelity Bank. "We think maybe tomorrow investors will begin to re-price risk, re-assess the yield curve and re-adjust."
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