Naira value likely to drop this year – Rewane

Managing Director, Financial Derivatives Company Limited, Mr. Bismark Rewane

The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, has said that the naira will come under intense pressure this year.

Rewane said in an interview with our correspondent that the new members of the Monetary Policy Committee would need to find a way to support the currency.

“I don’t want to use the word devaluation but I surely know that the currency will come under pressure. I know that the monetary policy in 2014 will change in line with the new players in the MPC,” he said.

Speaking on price level, Rewane noted that the average inflation rate would hover between nine and 10 per cent this year.

He said, “I think we will have a higher rate of inflation; the rate of inflation will increase a bit. I think anything between nine and 10 per cent because of the pressure on the naira. That will translate itself into higher prices.

“There will be a bit of pressure on the naira; there will be increased money supply. There will be wage pressure. Alternative cost of energy will be a determinant now that the power sector has been privatised; there will be higher tariff, which will determine inflation.”

The external reserves on Tuesday closed 2013 at $43.6bn, approximately $500m below the $44.1bn recorded on December 28, 2012.

According to the latest figure on the Central Bank of Nigeria website, the reserves dropped to $43.6bn on December 30, 2013.

The $43.6bn also shows that the reserves fell by about $700m below the $44.3bn it recorded on January 2, 2013.

Financial and economic analysts said the development showed that the reserves did not grow in any way during the year.

The Governor, Central Bank of Nigeria, Mr. Lamido Sanusi, had said in May that the outlook for the country’s foreign reserves this year was mixed.

Sanusi had told Reuters that the reserves would probably keep expanding, while facing risks from lower-than-projected oil output and falling prices.

According to analysts, the performance of the reserves is driven mainly by proceeds from crude oil, gas exports and crude oil-related taxes as well as reduced funding of the Dutch Auction System on the account of huge inflow of foreign portfolio investments.

However, the CBN governor recently dismissed claims that the reserves were experiencing a sharp decline.

He also allayed fears of uncertainties in the Nigerian economy and stressed that the reserves could finance about 11 months of importation.