By Yakubu LAAH InvestAdvocate
Lagos (INVESTADVOCATE)-Godwin Emefiele, governor Central Bank of Nigeria (CBN) on Friday faulted the JPMorgan Chase & Co GBI-EM indexes that there is lack of liquidity in the nation’s foreign exchange and bond market, affirming the correct valuation of the naira.
According to a Bloomberg report, Emefiele refuted the assertion by the index team that there is no liquidity. “There’s no reason to begin to take a look at the naira’s value after the central bank devalued the currency in November,” he said.
This is coming on the heels of Nigeria on the list of Index Watch Negative for JPMorgan’s local currency emerging market indexes on Friday following the CBN’s measures in December reducing foreign exchange and bond trading; making it difficult for foreign investors to replicate the gauge, Bloomberg quoted the New-York based lender.
The Nigeria’s central bank governor expressed surprise at the action of the JPMorgan index team, “the central bank wasn’t consulted. We want to stay in the index and we’re doing everything to make sure we do,” he affirmed.
Last November, the CBN at the end of its monetary policy committee (MPC) meeting increased benchmark interest rate to 13 percent from 12 percent; increasing it to 100 basis points.
The CBN sought to stem losses to its foreign reserves from defending the local currency as it moved the band to N160-N176 to the U.S. dollar, compared with N150-N160 previously, due to prolonged naira weakness and high dollar demand.
Also, the CBN in December directed banks to clear foreign exchange positions daily, having previously allowed them net open positions of 1 percent of shareholder funds.
Emefiele described the open-position rule as “a moving target based on our view of the liquidity and macro situation. It’s not cast in iron.”
According to him, the CBN will meet legitimate foreign-exchange demand in the market, not spurious or speculative demand. “When the banks are unable to, the central bank will intervene to make sure that any investor that wants to go out is able to do so freely, without any hindrance,” the CBN governor added.
