A Review of the Nigerian Energy Industry

Emefiele calls for calm as naira, stocks sustain decline

13 February 2015, Abuja – Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, has reiterated that there is no need for panic over the recent depreciation of the naira against the dollar, even as he reassured investors that the central bank will continue to meet legitimate foreign exchange demand.

Godwin Emefieli, CBN Governor.
Godwin Emefiele, CBN Governor.

Emefiele, who said this at the Nigerian Stock Exchange (NSE) yesterday, where he also rang the closing bell, insisted that the nation’s currency was “appropriately priced”.

However, the naira defied the CBN governor’s statement, as it slipped further to close at N206/$1 on Thursday in the interbank market, as against N205.90/$1 from the previous day.

Also, market capitalisation at the stock market dipped for the fourth consecutive trading session, closing at N9.321 trillion yesterday, representing losses of N475 billion in four days, compared to the N9.796 trillion on Monday.

But Emefiele maintained that globally, economies including Nigeria were contending with the drop in commodity market especially oil prices, saying: “The price of crude oil dropped from $115 per barrel to below $50 per barrel which has affected activities on the Nigerian capital market.”
He explained that this had led to the All-Share Index’s decline by 28 basis points, adding that the country’s gross domestic product (GDP) might also drop.

He however said the central bank was doing everything within its power to ensure price stability.

He added that the economy would survive the (postponed) elections, as it had done in past elections, assuring investors that the coming elections would be conducted peacefully.

He urged foreign investors to retain confidence in the Nigerian economy and capital market as the country would not disintegrate.

The CBN governor explained: “We are not in the best of times but there’s no need to panic. The Nigerian monetary authorities as well as fiscal authorities are doing everything they can to respond to these vulnerabilities.
“I repeat that there is no need for us to panic because we’ve looked at various scenarios and models where we looked at some of those actions that the monetary and fiscal authorities would kick in as we attain various levels in the price of crude.

“I think it is important for me to at least commend the fiscal authorities. In 2014, for instance, as these unfolding events started, the Minister of Finance invited the McKenzie group to look at our non-oil sources of revenue.

“In 2014, we had an over N75 billion increase in non-oil revenues. We are expecting that in 2015 this will ramp up to as high as $1 billion. Those are some of the activities that have been put in place. There is no need to panic.”

Emefiele added: “We’ve seen people also responding as a result of the political situation in Nigeria and all I can say is that the Nigerian economy remains resilient… And that is why I say there is no need to panic.
“The elections will take place. I am not supposed to respond to (questions on) elections, but it is important for me to say there is no need to panic as a result of the elections.

“The elections will happen, they will go, Nigeria will remain the same and economic activities will improve. That is a statement I thought I should make, not only to Nigerians but also to our foreign investors and partners who are working with us. Retain your confidence in Nigeria.”

The president of the NSE, Aigboje Aig-Imoukhuede, corroborated the views of the CBN governor and called on retail and institutional investors to invest in the capital market and the economy at large, saying: “There is a great fortune to be made in the Nigerian economy.”

Meanwhile, the CBN and bank chief executive officers (CEO), under the aegis of the Bankers’ Committee have also advised investors to remain calm, saying that the fundamentals of the Nigerian economy remain strong.
MD/CEO of Guaranty Trust Bank Plc, Mr. Segun Agbaje, who spoke to journalists at the end of the Bankers’ Committee meeting in Lagos yesterday, said the exchange rates “are very emotional”.

When asked if the naira was due for a further devaluation in view of the strong volatility in the forex market, Agbaje said: “The reality is that devaluation is not a curse.

“So where we are today, oil prices are down and as a country we are trying to find what level the country devalues to. There is no central bank in the world that allows a free-float of its currency.

“What you do is try to find the price level and find the rate at which you can live with. I think we are going through that process in Nigeria.

“That was why at the last MPC meeting, the CBN devalued and also moved the mid-point. What you are seeing in the interbank market is again some price discovery.”

On her part, the CBN Director, Banking Supervision, Mrs. Tokunbo Martins, who joined Agbaje at the briefing, said the committee discussed at length the state of the economy, adding that it was encouraging to note that despite all the headwinds, global and domestic, the banking industry remains safe, sound and resilient.

“We discussed the banks in terms of their capital adequacy, liquidity, profitability and asset quality, and it was concluded that all the ratios remain satisfactory.

“For the industry at large, all the banks were on average, above the regulatory minimum. So, in conclusion, the banking industry is safe, sound and resilient,” she added.

Agbaje also said the CBN and the banks agreed that there would not be any change in the operation of domiciliary accounts “and that there would remain unfettered access towards inflows into domiciliary accounts”.

Also, his counterpart at First City Monument Bank, Mr. Ladi Balogun,
noted that while it had been widely reported that there had been a drop in fiscal revenue from oil sources, the federal government expects non-oil revenue to rise to over N150 billion this year.

“The good news about that is that while there might be some structural challenges, historically, the trend is very positive in terms of diversification of the economy and certainly the banking industry is playing its own role in supporting that diversification with the variety of things going on in the SME space, in agriculture and others,” Balogun said.

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