CBN Governor
CBN Governor

  •  Explains why value of naira keeps depreciating

CENTRAL Bank of Nigeria CBN has stated that going by both its Examination Reports as well as analysis from market watchers, International Credit Rating Agencies, and Development Finance Institutions, the
Nigerian banking industry remains strong in spite of the global economic challenges emanating from the collapse of global commodity prices. This was contained in a statement signed by the acting Director Corporate Communication, Isaac Okoroafor yesterday. The statement however, explained that it became necessary to inform the public because there was unfounded speculations that some banks in the country may have gone or may be going into distress. “The CBN wishes to reiterate in the strongest terms that these rumours and speculations are untrue and do not reflect the actual health of the individual banks and, indeed, the entire banking industry.” Mr Okoroafor further explained that the infusion of a new Board and Management for Skye Bank PLC is a proactive regulatory action meant to ensure that the bank does not continue to fail in its relevant prudential ratios. He also said that neither Skye Bank nor any other bank in the industry is in distress. He also urged the general public to ignore speculations or rumours to the contrary as they could only be the handiwork of mischief makers who do not mean well for the Nigerian banking system and its economy.
According to Mr Okoroafor, “We therefore urge the banking public to remain calm and go about their normal businesses without panic. It is important that we do not create problems when none exists.” “As the regulator of the industry, the CBN hereby reassures the banking and general public that their deposits remain safe in any Nigerian bank.” “There is, therefore, no need for panic withdrawals from any bank.” In another development, CBN also stated that the exchange rate of the naira relative to major international currencies has been depreciating as a result of demand pressure in the foreign exchange market, reduced portfolio inflow and the low accretion to external reserves. This was obtained from the Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for Fiscal years monetary policy circular no. 41 2016/2017, obtained from the CBN website yesterday. The apex bank explained that the nation’s external sector remained highly susceptible to shocks due to the continued exposure to huge inflow of short-term capital and non- diversification of the economy. According to CBN some of the measures introduced to save the system were that the Bank closed the retail Dutch Auction System (rDAS) window of the foreign exchange market in February, 2015 and all demand for foreign exchange was channelled through the interbank market. In addition, the Bank reviewed downwards, the limit on the usage of naira denominated cards for transactions abroad, and excluded 41 items that could be produced locally, from being funded at the foreign exchange interbank market. Although CBN stated that the measures yielded some dividend, however, the external sector deteriorated from its position in 2014 as reflected in the overall and current account balance deficit of 3.50 and 3.90 per cent of GDP. The development was attributed to the continued decline in crude oil prices, capital reversals due to uncertainties that surrounded the 2015 general elections. External debt stock rose to US$10.32 billion or 2.30 per cent of GDP as at June 2015, representing an increase of 6.20 per cent above the level at end- December 2014. The observed decrease in foreign reserves was due mainly to a fall in crude oil receipts occasioned by the fall in the price of crude oil at the international market. The apex bank admitted that the pressure has constrained the economy in addition to the continued fluctuating price of oil in the international market. “Also, persistent decline in international oil price and its effects on government revenue necessitating continued government borrowing remains a challenge. Other challenges which include poor state of infrastructure such as road network, rail system, electricity, and water supply remained major macroeconomic concerns.” “The economy is further constrained by a weak technological base and high cost of domestic manufactured products, coupled with stiff competition from cheap foreign goods, low level of manufactured exports and the low utilization of local raw materials by industries, as well as insecurity of life and property.” It further stated.

READ ALSO  Yakassai blasts PDP ministers: You were not cards carrying members of the Party