Abuja- The Central Bank of Nigeria said it disagreed with the JP Morgan, a global financial firm, for putting Nigeria’s bonds on negative watch for three to five months.
Mr Godwin Emefiele, CBN Governor, said this while addressing newsmen at the end of the Monetary Policy Meeting on Tuesday in Abuja.
“I think it is important for me to review the news on JP Morgan Index team to place Nigeria on a negative watch for the next three to five months.
“It was widely reported by the foreign media, quoting JP Morgan that Nigeria’s foreign exchange as well as the local bond market is illiquid.
“I have responded to this by saying that we disagree with this situation or assertion that the market is not liquid.
“It is important to note that first of all, reducing net open position from one to zero, did not mean that there was no trading,’’ he said.
He added that there was intra day trading during those periods.
He added that the apex bank insisted that the banks must close their positions to zero because of the volatility in the market during that period.
“On exchange rate, we thought that we could not let that continue because we discovered certain uncomfortable tendencies in the market which portend speculative attack on the currency.
“We are keenly monitoring the market.
“ That was the reason we took that decision; we were very clear when we say that the net open position was being reviewed by zero at that time in the interim.
Emefiele said that committee of governors had reviewed net open position upward to 0.1 percent after the activities of the market were reviewed on resumption of market in January.
He assured that the apex bank would continue to review the position, noting that the situation could be reviewed anytime.
“ It’s possible that even after this pronouncement, we review this situation, after a look at the level of liquidity in the market and we feel comfortable with what is happening.
“We might come up tomorrow to review the net open position further up,’’ he added.
He said that it was the core mandate of the apex bank to defend the currency and its exchange rate.
He added that the bank had been monitoring and felt that the interbank will continue to support trading activities of both Nigerians and foreign investors.
He said that at any point it was observed that the market was unable to provide the liquidity that was needed, the CBN would intervene to provide the liquidity required.
The governor noted that the apex bank had the mandate to ensure that transactions taking place in the market were legitimate.
“ So, we will be engaging the JP Morgan Index to provide our numbers and to prove the level of liquidity; and I am very optimistic that they will see reasons with us.
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“Let me assure you, we will do everything possible to continue to remain on the index; we know the adverse impact that the exclusion of the index will cause the country,’’ he said.
He said that what was paramount was that the external reserve was defended and the exchange rate policy be stabilised.
“We will ensure that anybody who needs foreign exchange to transact business in the country will be allowed to do so but for legitimate purposes.
“We (CBN) will not tolerate speculative attack on the currency.’’
Commenting on whether the currency would further be devalued in view of global developments, he said it was not an issue to dwell on but an issue that would be subject to review.
He said that at present the currency had been appropriately priced and assured that the apex bank was strictly monitoring market development.
“The currency is appropriately priced. Our assessment since devaluation remained positive.’’ Emefiele said.
He said that the bank had observed the gap between the official exchange rate and what was obtainable in the Bureau De Change but assured that the bank was working to bridge the gap.
“We are doing our best to see how we could bridge the gap by intervening in the market; we know that allowing the gap will create certain opportunities for certain people.
“We do not want the exchange rate to spiral out of control and that is why we are watching and at the appropriate time, certain actions will be taken.
“ What action will it be, I don’t know because that will be strictly the decisions of the governors,’’ he said. (NAN)
