Report Predicts Naira Devaluation On Sanusi’s Suspension

The naira is at risk of being devalued after President
Goodluck Jonathan suspended the Central Bank
Governor, Mr. Lamido Sanusi, last week, eroding
confidence in monetary policy and sending the naira to
a record low.
Bloomberg reported that the naira, which rose for the
first time in six days on Monday, posted its biggest five-
day drop in eight months last week.
The yield on Nigeria’s July 2023 dollar bond had its
steepest one-day jump on record after Sanusi’s removal
on February 20. The security has lost 2.3 per cent this
year, compared with a 0.6 per cent drop in the
JPMorgan Chase & Co. index of African sovereign debt.
While the acting governor pledged continuity in policy
on February 21, saying there were no plans to devalue
the currency, the central bank will have to fight to keep
the naira within its targeted range of three per cent
above or below 155 at twice-weekly foreign-exchange
auctions.
The peg may be shifted to 170 per dollar, boosting
inflationary pressures, according to Yvonne Mhango at
Renaissance Capital.
“The market seems to be anticipating a devaluation,”
Mhango, a sub-Saharan Africa economist at RenCap,
said in a February 21 phone interview from
Johannesburg. “Given the loss of confidence and
sentiment turning against Nigeria, I think they’re going
to struggle to keep the naira at present levels.”
The suspension of Sanusi, 52, followed the governor’s
calls for an investigation in December into billions of
dollars in missing oil revenue.
Sanusi, who was due to leave office at the end of his
term in June, oversaw a drive for stability in Africa’s
second-biggest economy. Sarah Alade, his deputy, was
named acting governor.
Nigeria’s “economic fundamentals cannot be predicated
on a single human being,” a central bank spokesman
Ugochukwu Okoroafor said on the phone from Abuja
on Monday.
“The person coming to succeed Sanusi is a strong player
in the industry and knows what to do on monetary
policy. There is no basis nursing fears of a devaluation.”
Alade has given assurances that monetary policy won’t
change, Doyin Okupe, a spokesman for Jonathan, said in
a mobile-phone text message.
“The initial fluctuations following the suspension have
stabilised,” he said.
There’s “no indication whatsoever that a devaluation of
the naira will occur,” Okupe said.
Sanusi could return if cleared of allegations, Jonathan
said on state-owned NTA television on Monday, adding
it was within his powers to remove the central bank
chief.
The currency gained 0.1 per cent to N164.35 per dollar
by 10:34am in Lagos, strengthening for a second day
after the CBN auctioned $399.7m to lenders. It also sold
dollars directly to banks, Kunle Ezun, an analyst at
Ecobank Transnational Inc. in Lagos, said on the phone
on Monday.
The bank’s Monetary Policy Committee has kept the
benchmark interest rate at a record high of 12 per cent
for more than two years, pushing inflation below 10 per
cent. Consumer-price growth climbed above 15 per cent
in the first half of 2010.
If the currency is devalued in July at the first MPC
meeting under Godwin Emefiele, Jonathan’s nominee to
replace Sanusi, consumer-price growth may climb to as
high as 12 per cent by year-end, Mhango said in a
February 21 note.