Nigeria’s external reserves have risen to $45.68 billion, which is the highest in more than two years.
Governor of Central Bank of Nigeria, CBN, Mallam Sanusi Lamido Sanusi, disclosed this at the 46th annual dinner of Chartered Institute of Bankers of Nigeria (CIBN), weekend, in Lagos.
The external reserves as at the end of October were $42.67 billion. This implies that the reserves rose by $3.01 billion or 0.7 per cent between October 31 and November 16.
Further analysis showed that the reserves had been rising persistently since August 6 when it recorded the last decline from $36.579 billion to $36.408 billion. Also when compared with its level of $38.59 billion on August 10, 2010, the new level of $45.68 billion represents the highest level of the reserves in 27 months.
In his keynote address, Sanusi said the increase in external reserves was necessary to protect the economy from external shocks arising from decline in crude oil prices and emphasised the need for fiscal restraint and fiscal consolidation.
He said: “It is important not to be complacent and it is important to recognise that there are dark clouds in the horizon and it is extremely important to start building and continue building the fiscal buffers, go into a period of strong restraints and serious fiscal restraints and consolidation. We must continue to build up the external reserves and protect the economy from external shocks to oil prices and focus on the strength and resilience of the banking system.
“In a year that government removed 50 per cent of fuel subsidies, where you have very high increase in international food prices and energy prices, where you have general instability and where we had forecast that inflation might reach 14.5 per cent in August, inflation is still under 12 per cent. As at September, inflation was 11.3 per cent, but we expect that there might be an inching up in food inflation figures expected to come out on Monday, but because of the tight monetary conditions we have kept we now have a moderation in core inflation.
“We now have high reserves of more than a two-year high, stable exchange rates, relatively benign inflation, but obviously, very high interest rates and lending rates in the money market.”
Outcome of recent banking reforms
Speaking on the outcome of the recent banking reforms, he said: “The IMF has just concluded a financial stability assessment programme and they are extremely impressed by the work that has been done. They were able to pronounce that we have put the banking crisis behind us. The Nigerian banking industry with average capital adequacy ratio of 17 per cent is one of the highest in terms of capitalisation in the world.“The banks have strong liquidity position. We have worked with governance issues. While the rest of the world is still debating what they would do with universal banking, we have broken up the universal banks. We have set up an AMCON that has not just bought NPL, but has recapitalised the banks and we are happy to say that a few months ago, Spain has copied that model.
“AMCON had to put in nothing less than N2.3 trillion just to fill the hole that had been left by the management of banks, and when I talk about hole, I am talking about negative capital. If that N2.3 trillion had not been put in, what would have been lost was N30 trillion in deposits and interbank. Many of the banks that were safe and healthy would have been brought down by the banks that had taken money from them. And many people don’t realise the implications of that.
“In addition, while the costs are there, the actual cost to the federal treasury that would have come under the central bank’s balance sheet is N500 billion over 10 years, with present value of N300 million, which is less than half of what NDIC would have paid to insured depositors alone. The rest of the money is coming from the sale of assets by AMCON, but a significant part is coming from the balance sheet of banks. Nigeria is the only country that has made the banking industry itself pay for the cost of its clean up.
“Banks are not set up to invest in government bills alone, banks are not set up to use depositors’ funds to bet on the capital and real estate markets, banks are set up primarily to mobilise savings and move these savings into the real economy where real production, real jobs and real income are created.
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Mallam Sanusi L. S. is what others will envy but will never want to admit. Kudos to you but i also share in the dislike for the eradication of Naira notes of some money denomination and their subsequent replacement with coins. That mathematics i dont understand and even if it has any theoritical backing, it wont work positively in the Nigerian economy.
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