By Ademola Alawiye with agency report

Friday, 28 Jan 2011

The Governor of the Central Bank of Nigeria, Mr. Lamido Sanusi, has said that excessive government spending and political uncertainty are putting pressure on the naira.

Reuters quoted Sanusi on Thursday as saying at the World Economic Forum in Davos, Switzerland, that “what is putting pressure on our currency is excessive government spending and political uncertainty.”

Nigeria’s foreign-exchange reserves declined by about $10bn in the year through November 29 to $33.1bn as the apex bank used the funds to defend the naira.

The currency is currently trading at N151.90 per dollar compared with a two-week low of N154.05 on January 13.

Sanusi also pointed out that the monetary authority wanted the country’s inflation rate to fall below 10 per cent soon.

He said, “The CBN wants inflation below 10 per cent as quickly as possible, though we won’t place economic growth or stability at risk to achieve the goal.

He added, “We don’t target inflation rate in CBN, but we have always implicitly considered single-digit rates as a desirable objective.”

According to information from the National Bureau of Statistics, inflation slowed for the fourth consecutive month in December, dropping to 11.8 per cent from 12.8 per cent in November.

The prospect of a pick-up in inflation prompted the Monetary Policy Committee to raise its benchmark interest rate by a quarter of a percentage point to 6.5 per cent on January 25.

Sanusi said, “Inflation itself has been on a downward trend though it’s still high. High inflation is the trend in the rest of the world because of rising food prices, energy prices and there’s very little reason to believe that a declining trend in inflation is sustainable.”

The Minister of Finance, Mr. Olusegun Aganga, said on Tuesday that he expected the inflation rate to fall below 10 per cent over the next year as food production increased and electricity generation improved.

 

Source: Punch