Some finance experts have commended the Central Bank of Nigeria for its attempt to save the naira from falling freely, especially in an era when currencies are struggling to maintain their value.
Ayo Teriba, the managing director, Economic Associates, a finance research and investment advisory firm, said the Central Bank made a good decision to help the nation’s local currency.
“I think the Central Bank did well in helping the naira by attempting to meet the demand for Forex at the Forex market. If they hadn’t, it would have resulted into the conversion of a global problem into a domestic one,” Mr. Teriba said.
He said this on Wednesday at the firm’s one-day conference on ‘Economic and Financial Outlook in 2011’ held in Lagos. The event was to deliberate on outlook for global and domestic markets for 2011, the extent to which the post-crisis economic and financial rebalancing forces that currently dictate the pace of global demand, commodity prices, and financial markets are expected to continue into 2011.
“We were able to hold rates reasonably stable, even though it costs us our reserves. The Central Bank has helped stabilise our exchange rate even though it’s at the expense of our foreign reserves,” he added.
Sanusi Lamido Sanusi, the Central Bank governor, has said that the regulatory body would not allow a free fall of the nation’s currency and that it would also endeavour to meet foreign exchange demands at the auction markets.
Fairly stable outlook
Most members of the audience from strategic planning units of various banks, pension funds, and other finance firms agreed that outlook for the global and domestic economy is fairly stable.
“Output for the global economy is positive, as far as commodity prices are concerned. We anticipate that there could be growth next year without as much fluctuations as we experienced this year,” Mr. Teriba said.
Participants, however, pointed out that there may be uncertainties next year from political concerns and the elections.
While accepting that likely election risks should be anticipated, Mr. Teriba says the financial outlook for the nation is not likely to depreciate beyond its present level.
Akintola Akinbamidele, a Research Analyst, Renaissance Capital, an investment firm, says sharp political uncertainty should be anticipated, which could restrain investor participation in some of the nation’s markets.
“One main concern arises from the increment in recurrent spending as a percentage of total spending, which is projected at 75 percent in 2011 versus 49 percent in 2010. With historically low execution levels of capital projects, the much needed period of sustained high economic growth will be delayed. Exacerbating this scenario is the “potential” laggard effect on project execution by newly appointed public officials following an election period.
“We are of the opinion that post April 2011 elections and into 2012, fiscal and monetary policy will be mirrored. Thus the outlook for lower yield outlook in 2012 should drive significant valuation on bond prices,” he added.
He further said that the firm’s major catalyst for its outlook is the nation’s continuation in the anticipated reforms in power, oil and infrastructure.
The conference was the fourth in a quarterly series of economic event by the firm this year.
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