Depreciation of naira 'll be temporary - CBN

The Central Bank ofNigeria (CBN)Governor, Lamido Sanus,i has assured that the present depreciation of naira would be temporaryA foreign news agency quoted the CBN Governor as saying that as the monetary tightening measures currently being churned out by the apex bank begin to take effect, the naira should strengthen.'My feeling is that the naira is going to strengthen as measures kick-in. What you are seeing this week is not the long-term trend,' he said.The naira slumped to its lowest ever on last Monday, just before an emergency Monetary Policy Committee (MPC) of the CBN meeting where interest rates were hiked far further than analysts expected and several other tightening measures were imposed.The naira initially recovered from the record low of N167.8 to the dollar as the CBN backed up its interventions by selling over $1 billion into the market in a week, traders said.But trading on the currency remains volatile with dealers not willing to quote actively. The naira ended the week at N164.05 in the interbank market, far weaker than at the central bank's auction on Wednesday when the regulator sold $591.67 million at N150 to the dollarThe CBN, on Monday, raised its benchmark interest rate by 275 basis points to 12 per cent, upped the cash reserve requirement of banks to 8 per cent from 4 per cent and reduced net open positions lenders can hold as reserves to 1 per cent of shareholders funds, from 5 per cent.These measures were intended to reduce the quantity of naira in the system and free up dollar supply.To further restore sanity in the forex market, the apex bank also said it will no longer allow petroleum dealers to source dollars at its official window for imports. Petrol importers have bought over $7 billion from the auction so far this year, depleting the nation's reserve, central bank said.CBN also said on Friday that it would limit forex sales at its auctions to foreign firms taking the currency offshore because they can buy from the interbank market, which will reduce the reliance on the CBN for foreign exchange supply.'We have not introduced capital controls. We are simply saying if you are bringing in capital into the market, then you can also take from the market. It should also be clear that the interbank market is larger than the WDAS (CBN auction); we are not pushing anyone into a narrow end,' Sanusi said.
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