Central Bank Will Probably Increase Cash Requirements to Save Naira

The Central Bank of Nigeria (CBN) will probably increase the limit on cash reserve requirements to help arrest a decline in the naira as the country misses out on potential oil revenue, said Governor Lamido Sanusi.
The central bank may increase cash reserve requirements for lenders to hold government deposits for the second time this year to 100 percent from 75 percent, Sanusi said at a conference today in the West African nation’s commercial hub, Lagos. It will probably raise the requirement on private funds to 15 percent from 12 percent, Sanusi said.
The currency traded 0.4 percent weaker at 164.70 per dollar by 2:30 p.m. in Lagos, heading for a more than two-year low. The naira’s 2.7 percent drop against the dollar since last year makes it sub-Saharan African’s fifth-worst performer.
Nigeria’s economy wouldn’t benefit from a devaluation of the naira as it may increase the cost of imports and raise the number of non-performing loans in the banking industry, Sanusi said. Revenue “leakages” in the oil industry and crude theft have eroded the funds available to the government to defend the currency. Sanusi said last week that the state oil company hasn’t accounted for $20 billion in crude income.
The government’s Excess Crude Account, which holds the savings the nation makes when the oil price is above the rate estimated in the budget, dwindled to $2.28 billion by Dec. 31 from $8.65 billion at the end of 2012, according to Finance Ministry data.
Foreign exchange reserves, which the central bank has been selling to support the naira, are at $42.4 billion, according to central bank data, down from $48.9 billion in May.
Source: Bloomberg

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