CBN’ll defend naira with reserves –Sanusi

The Central Bank of Nigeria on Tuesday said it would do everything possible to defend the naira and ensure its stability, including using the nation’s foreign reserves to achieve the purpose.

The Governor, CBN, Mr. Lamido Sanusi, said this while addressing journalists shortly after the 234th Monetary Policy Committee meeting held at the central bank’s headquarters in Abuja.

He said, “As far as the naira is concerned, we have always said we are committed to its stability. I have not heard any economic argument that there is any economic value in devaluing our currency.

“My view and that of the CBN is that if we need to tighten money, use some of our reserves to support the economy, we will. No central bank governor will say he will support the currency at all cost.

“But we want to be very clear that there is no country that allows its currency to just be determined by the market. We are not looking for a stronger currency neither are we looking at a weaker one. People want to pay fees and investors want to know if they will have returns on investments.

“We will use the reserves, we will use interest rates, we have gone through difficult months; hopefully, the next few months will not be difficult. We will not allow the naira to be weakened and we are committed to that.”

Sanusi also said the bank had discovered massive fraud and misrepresentation of accounts in the books of Consolidated Discount House Limited.

Consolidated Discount House was incorporated on November 16, 1995 as a limited liability company and was licensed by the CBN on August 14, 1996 to carry out the functions of a discount house.

The CDL is wholly owned by a consortium of four Nigerian banks and another organisation, with authorised share capital of N4bn, which is fully paid by its shareholders namely: First Bank of Nigeria Limited, Mainstreet Bank Limited, Union Bank of Nigeria Plc, Skye Bank Plc and CDL Cooperative.

Sanusi said the CBN auditors were still investigating the books with a view to determining the dimension and extent of the fraud, adding that in the next few weeks, appropriate action would be taken by against the company.

The central bank had on July 18 revoked the licence of Express Discount House following the revelation of continued deterioration of the financial position of the company.

But Sanusi said on Tuesday that the move, which led to a run on discount houses, had prompted the bank to carry out a comprehensive review of the sector.

The outcome of that review, he said, led to the discovery of fraud in the books of CDL.

He said, “We have taken a comprehensive review of the discount houses, and as you know, the CBN revoked the licence of Express Discount House a few weeks ago, which led to a run on the discount houses.

“On reviewing the houses, we discovered that Kakawa Discount House and Associated Discount House are in good form and the shareholders are solidly behind them, and we discovered in the case of Consolidated Discount House, what appeared to be a massive fraud and misrepresentation of accounts.

“We have taken action; we have our examiners in there trying to look at the dimension and extent of the fraud. We will pay depositors in the course of this week; so, no non-bank depositor is going to lose any money in CDH and we will come up with an appropriate statement in the future; otherwise, everything is calm.”

The CBN boss also said the Monetary Policy Committee members at the meeting expressed worry over the banking sector’s reliance on monetised oil revenue to boost banks’ liquidity.

Sanusi said going by the development, there was a need for the banks to alter their business model to reduce vulnerability.

He also said the committee expressed concern over the recent developments in the money market rate, which according to him, rose astronomically to peak at 40.0 per cent on September 18, 2013.

He, however, said the high money market rate, which arose from the stalemate and postponement in sharing this month’s statutory revenue by the Federation Accounts Allocation Committee was temporary.

The development, he said, had made banks, which participated in the Wholesale Dutch Auction System window, to prefer paying high interbank rate for one day rather than borrowing from the CBN at 14.0 per cent and being barred from the WDAS window.

Sanusi said, “The committee considered the developments in the money market rates, which rose astronomically to peak at 40.0 per cent on September 18, 2013. However, these developments were temporary, arising from the postponement/stalemate in sharing the monthly FAAC revenues.

“Banks, which participated in the WDAS window, expressed a preference for paying high interbank rate for one day rather than their borrowing from the CBN at 14.0 per cent and being barred from the WDAS window.

“In any case, the committee noted the continued dependence of the banking sector on monetised oil revenues for its liquidity and stressed the need to keep pushing banks into altering their business model to reduce vulnerability.”

Sanusi also said the committee expressed concern about the worsening performance of the oil sector, which is principally due to the growing incidence of crude oil theft and significant revenue leakages in the sector.

“The committee, therefore, urged the government to step up efforts aimed at curtailing the malfeasance in the oil sector and adopting best practice in establishing strong controls, independent oversight and transparency in the official oil sector,” he added.

On the Monetary Policy Rate, the governor said the committee noted that the actions taken at the last MPC had served the purpose of helping the naira avoid the fate of other developing countries’ currencies by keeping it relatively stable.

For instance, he said in more than 30 countries surveyed, the naira exchange rate remained one of the most stable, having depreciated by only 2.3 per cent from year to date.

The naira, he added, performed better when compared with the massive depreciation in the value of other currencies such as the Indian rupee, the Indonesian rupiah, the Brazilian real, South African rand and the Ghanaian cedi.

While noting the continued moderation in inflation and the outlook for the next six months, the committee, according to the governor, decided by a vote of 11 members to hold the MPR at 12.0 per cent.

Sanusi said, “In consideration of all the issues, the committee decided by a vote of 11 members to hold the MPR at 12.0 per cent.

“One member voted to reduce the MPR by 50 basis points. Eleven members voted to retain the symmetric corridor of 200 basis points around the MPR, while one member voted for an asymmetric corridor of 200 basis points above the MPR and 400 basis points below the MPR.

“All members voted to retain the 50.0 per cent Cash Reserve Requirement on public sector funds and 12.0 per cent CRR on private sector deposits.”

The governor said the committee also urged the CBN to ensure the stability of the currency and to fast-track plans for adopting new regulations aimed at combating money laundering in the Bureau de Change segment.

He said, “We think there is something absolutely wrong with the BDCs buying hundreds of millions of dollars and not being able to account for them. We think that this money is not being used for the importation of goods and services; we think it is a part of a money laundering exercise and we will have to deal with it.

“We also think that the whole policies around massive withdrawal and deposit of cash should now move from naira to dollars, and we have to stop the situation where Nigeria has become the highest importer of the United State currency in the world.”

Sanusi noted that in the next few weeks, the country would see a new policy for the sector from the CBN.

“I know there will be a lot of resistance from outside; but again, what is new?” he added.