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Nigeria's central bank will strive to protect the country's foreign exchange reserves after a British court has granted the right to a small natural gas company to seize $ 9 billion of government assets Nigerian, announced Monday the head of the bank.
Such a sum would be one of the largest financial commitments imposed on Nigeria in its history, representing 20% of the foreign exchange reserves of Africa's largest economy and largest oil producer.
Godwin Emefiele, head of the central bank, said that Nigeria had sufficient grounds to appeal the decision, which concerned an aborted gas project in the southern city of Calabar, and was released Friday. favor of Process and Industrial Developments Ltd.
"We know that the implication of this judgment has an impact on monetary policy," Emefiele told reporters in Abuja, the capital. "That's why the central bank will engage and … defend the reserves."
The pressure has increased on the naira, Nigeria's currency, as oil prices fall.
In addition, foreign investors have blocked their profits on local bonds as yields fell by 18% a year ago. While yields fell – with rising bond prices – foreign capital inflows slowed. This led to a shortage of dollars and depressed the naira.
In an additional sign of pressure on the currency, President Muhammadu Buhari has asked the central bank to stop funding food imports, his spokesman said.
"Fuel on fire"
Emefiele did not specify what other measures the central bank could take to defend the country's currency or its foreign exchange reserves.
"FX [foreign exchange] the pressures have intensified, "said Cobus de Hart, senior economist at NKC African Economics in South Africa.
He added that "the British judgment could fuel the fire".
"Disturbingly, the central bank is using more unconventional tools more regularly to try to maintain the stability of the naira and preserve its reserves," Hart added, suggesting that lingering risks could result in "slowing growth and higher inflation ".
On Monday, traders were looking for higher rates for one-year treasury bills as the naira weakened.
The naira has been quoted at $ 364 per dollar for foreign investors since last week, rising from $ 363.50 while liquidity is depleting on the foreign exchange market.
Nigeria applies a multiple exchange rate regime used to manage the pressure on the currency.
Last week, Emefiele met with fund managers in London as part of a road show, while the central bank urged brokers to attract foreign investors by raising their rates.
Emefiele sought to reassure investors – who seemed to be focusing on lowering oil prices and debt problems – by saying the Nigerian currency would remain stable.
SOURCE:
Reuters News Agency
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