A British court ruling that granted a small natural gas firm the right to attempt to seize $9 billion in assets from Nigeria’s government had had some impact on the country’s monetary policy, the head of its central bank said on Monday.
Godwin Emefiele said Nigeria had sufficient grounds to appeal the ruling, over an aborted gas project in the southern Nigerian city of Calabar, made on Friday in favour of Process and Industrial Developments Ltd. “We know that the implication of that judgment has some impact on monetary policy and that is why the central bank is going to step forward and … defend the reserves,” Emefiele told reporters in the capital, Abuja. The sum of $9 billion is some 20% of Nigeria’s foreign reserves.
Pressure has been building on the naira as oil prices drop and foreign investors’ book profits on local bonds in response to yields which have fallen from as high as 18% a year ago. A dollar shortage was initially caused by a slowdown of foreign inflows after local debt market yields declined. In a further sign of pressure on the currency, President Muhammadu Buhari last week told the central bank to stop providing funding for food imports, his spokesman said.
However Emefiele did not say what other measures the central bank might take to defend the country’s currency or its foreign exchange reserves. Nigeria operates a multiple exchange rate regime that it has used to manage pressure on the currency. The official rate of 306.90 to the dollar is supported by the central bank, but the traded rate of 364 is widely quoted by foreign investors and exporters. Last week, Emefiele met fund managers in London in a roadshow arranged by South Africa’s Standard Bank following its second debt auction that week, where the central bank told dealers to raise rates.
The fund manager told Reuters investors were focused on the oil price and the bank’s policy on debt sales.