CBN devalues naira exchange rate to N150-160 to dollar

The Central Bank of Nigeria (CBN) yesterday devalued the naira. The apex bank moved the band it wants the local naira currency to trade in to between N150-N160 against the U.S. dollar, compared with N145-N155 to the dollar previously, due to prolonged naira weakness and high dollar demand. The naira was trading at around N158.90 to the dollar on the inter-bank market on Monday, having hit an all-time low of N167.40 in October, prior to sharp monetary tightening measures which have since stabilised the local currency. The CBN monetary policy committee (MPC) however left its benchmark interest rate unchanged at 12 per cent and its 200 basis point corridor around the benchmark rate, so its recommended deposit rate is 10 per cent and its lending rate is 14 per cent. Interest rates were hiked by a surprise 275 basis points at an emergency meeting in October. CBN Governor Lamido Sanusi said the headline inflation figure should not be “exaggerated” because it was mostly driven by food inflation and other prices actually declined. Sanusi said the CBN would be ready to react if fuel subsidy removal pushed up inflation but he didn’t expect the policy to have the strong impact on prices some expect. The cash reserve requirement of banks was left at 8 percent, having been hiked from 4 percent at an emergency meeting in October to help support the naira.