Nigeria's apex bank to stabilize naira with foreign reserves
12/12/2008 17:22
The Central Bank of Nigeria (CBN) has announced that it will use part of
the country's US$58.11 billion foreign reserves to stabilize the
currency.
According to the Punch newspaper report today, the bank is worried
that the stability of the national currency, the naira, could be further eroded
by the global economic and financial crisis.
A severe shortage of US dollars
in the official and inter- bank markets has seen the naira decline by about 10
percent in the last two weeks.
Chukwuma Soludo, CBN Governor, disclosed this
to newsmen at the end of the 206th Monetary Policy Committee meeting in Abuja
yesterday.
He announced that the reduction of banks'exposure to foreign
exchange trading by 50 percent begins from Dec. 15.
Beginning from the date,
no bank will be allowed to invest more than 10 per cent of its shareholders 's
funds in foreign exchange trading.
The measure was taken to protect banks
from over exposure to the vagaries of the forex market.
Uncertainty in the
market last week pushed banks into panic buying and many recorded heavy losses
as the exchange rate wildly fluctuated.
The CBN boss confirmed that the bank
would deploy some of the foreign reserves to restore stability to the naira,
which dropped by about 132 naira to the dollar from 117 naira in just two
weeks.
According to him, the apex bank will seek to inject stability into the
forex market by actively participating in the daily inter- bank foreign exchange
market by buying and selling through the two- way quotes.
He said the CBN
remains committed to a stable exchange rate regime and will continue to meet the
demand for foreign exchange at market determined rates.
Xinhua
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