THE Central Bank of
"The aggressive sale of international reserves by the CBN over the last week has raised concerns over whether the central bank has sufficient ammunition to protect the value of the currency,"
It was reported recently that foreign exchange reserves had fallen 10 percent year-on-year and are teetering above
"We believe that the CBN will struggle to contend with further losses in its international reserve position as a large proportion of remaining stock is held in equities, increasing its vulnerability to speculative outflows. It is important to keep in mind that recent weakness is a function of capital outflows from domestic markets which is symptomatic of generalised EM risk aversion rather than structural challenges," the researchers said.
RMB is against devaluing the local currency as has been suggested.
"We do not support the notion of a devaluation at this stage and believe that the CBN would pursue tightening of monetary conditions through liquidity ratios before contemplating adjustments to the reference point."
The Naira has responded to the CBN's most recent efforts, retreating to US$/ N163,04.
"However, a meaningful reversal is only likely to occur once EM panic abates," stated the think-tank.
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