Nigeria’s central bank will strive to protect the country’s currency reserves after a British court ruling granted a small natural gas firm the right to try to seize $9 billion in assets from Nigeria’s government, the bank’s head said on Monday.
Such a sum would be one of the largest financial liabilities imposed on Nigeria in its history, representing 20% of the currency reserves of Africa’s largest economy and top oil producer.
Central bank chief Godwin Emefiele said Nigeria had sufficient grounds to appeal the ruling, over an aborted gas project in the southern Nigerian city of Calabar, made on Friday in favor of Process and Industrial Developments Ltd.
“We know that the implication of that judgment has some impact on monetary policy, and that is why the central bank is going to step forward and … defend the reserves,” Emefiele told reporters in the capital, Abuja.
Pressure has been building on the naira NGN= as oil prices drop and foreign investors lock in their profits on local bonds as yields have fallen from as high as 18% a year ago. As yields have fallen, foreign inflows have slowed, in turn leading to a shortage of dollars and hurting the naira.
In a further sign of pressure on the currency, President Muhammadu Buhari last week told the central bank to stop providing funding for food imports, his spokesman said.
However Emefiele did not say what other measures the central bank might take to defend the country’s currency or its foreign exchange reserves.
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“FX pressures have intensified as global risk-off sentiment incentivises some portfolio reversals, and the UK judgment could add further fuel to the fire,” said Cobus de Hart, senior economist at South Africa’s NKC African Economics.
On Monday, traders were seeking higher rates for one-year treasury bills as the naira weakened, and bid-offer spreads doubled in volatile trades.
