Foreign Reserves Rise As President Buhari Continues Plugging Leakages

CBN Governor Godwin Emefiele
CBN Governor Godwin Emefiele

Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, yesterday, disclosed that Nigeria’s foreign reserves have increased from $28.57 billion at the end of May to $31.53 billion as of July 22, 2015, following blockage of leakages by President Muhammadu Buhari as his anti-graft war gathers momentum.

“It is true that Mr President, based on his insistence that leakages must be blocked, there have been serious attempts to block leakages both in Naira and in dollars. Some funds have been trapped in banks and that is the reason there is a vigorous effort to ensure that we all embrace the Single Treasury Account where all revenues collected must come to the centre and after all the revenues have come to the centre, then based on the budget that has been approved for any agency of government, whatever is due to them to meet their operational expenses would be given,” Emefiele said following the Monetary Policy Committee meeting.

“But first point is that all revenues must come to the centre. In the course of these, yes, I can confirm that there were leakages that have been blocked and as a result we have seen some funds trapped in some areas now coming into the centre and that is part of the reason you see the reserves build up.”

According to the CBN governor, the apex bank and the Nigerian National Petroleum Corporation (NNPC) have been holding talks towards significantly reducing fuel importation which takes a lot of foreign exchange.

“Let me confirm that the CBN and the NNPC have held a couple of meetings and I am aware that Port-Harcourt and Warri have started refining petroleum products. We are expecting that in the month of August, Kaduna Refinery will begin refining petroleum products.

“Hopefully, as they ramp up production, they would be able to get to about 19 to 20 million litres that they can produce to meet our daily consumption level of about 30 million litres. Our interest as CBN is that by this act alone we are going to record a drastic reduction in the importation of petroleum products which will ultimately help our reserve position and help us in our mandate of strengthening the exchange rate,” he said.

He said the CBN has retained the Monetary Policy Rate (MPR) at 13 percent and equally left the symmetric corridor of 200 basis points around it and the Cash Reserve Ratio (CRR) retained at 31 percent.

According to the governor, monetary policy would remain tight because of the high liquidity in the system. He noted that the drivers of the current upward inflationary spiral were of a transient nature and mostly outside the direct control of monetary policy.

On inflation, Mr. Emefiele expressed concern about “the gradual but steady increase in headline inflation up to June 2015, and noted that this reflected a rise in both the core and food components of inflation.” Core inflation rose to 8.4 per cent in June from 8.3 per cent in May, and food inflation increased to 10.0 per cent from 9.8 per cent, over the same period.

He noted that “the up-tick in year-to-date inflation rates were traceable to transient factors such as energy, arising from scarcity of petroleum products around the country, poor electricity supply and increased demand for transportation and food, from the build-up to the general elections and the ensuing Easter and Sallah celebrations.”

Addressing the issue of the value of the Naira at the foreign exchange market, the CBN boss also said that at $1- N 197, the nation’s currency was well-priced, foreclosing any new plan to devalue it.

He said that more than 95 percent of transactions that take place in the financial system that involve procuring foreign exchange were done at the inter-bank segment of the market and that as such the Bureau de Change segment could not be relied upon for the value of the Naira. At the BDC, Naira exchanged at about N244 -$1 at the middle of the week.

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