CBN devalues naira, changes exchange rate target •Sanusi can hire, fire bank MDs – Court insists

Posted by admin CBN (Central Bank of Nigeria), Headlines Monday, November 21st, 2011

THE Central Bank of Nigeria (CBN), on Monday maintained its current posture on a Monetary Policy Committee’s (MPC’s) decision on interest rates based on its perceived stability in macro economic indicators for the period under review.

Also, the apex bank has devalued the naira by changing the exchange rate target from the present N150 to N155 per US dollar.

Briefing the media after the 80th MPC meeting attended by 11 out of the 12 members of the committee, the apex bank governor, Mallam Sanusi Lamido Sanusi, disclosed that by a unanimous vote, the committee decided to retain the Monetary Policy Rate (MPR) at 12.0 per cent and the symmetric band at plus/minus 200 basis points.

He said the committee also retained the Cash Reserve Requirement (CRR) at 8.0 per cent.

Sanusi said the committee felt that external developments had, in general, responded favourably to monetary policy stance adopted at the last MPC meeting in October.

However, the committee urged the CBN to be vigilant with respect to the development in the Foreign Exchange (FOREX) market and maintain its stance in favour of stable exchange rates and send clear signals that would help anchor the expectations of investors, manufacturers and policy makers in the short to medium term.

As a result, he said the MPC had adjusted the mid-point of target official exchange rate from N150 to N155 per US dollar and maintained the band of plus/minus 3.0 per cent.

According to the governor, the naira should float roughly within the range of N150 to N160 to US$1 unless extraordinary shocks necessitated a change in stance.

He said this is to encourage the CBN to continue to seek convergence between WDAs and interbank rates to reduce arbitrage opportunities, avoid speculative attacks and the emergence of a multiple exchange rate environment.

The apex bank boss said the decision to change the exchange rate from N150 to N155 US dollar was to maintain a stable and predictive exchange rate and not a volatile one.

On the Sovereign Wealth Fund, the governor stated that although political negotiations were continuing between states and the Federal Government, it would appear, from public statement on both sides, that a positive resolution would be reached very soon.

The governor, disclosing that the risk of inflation from removal of fuel subsidy is ever present, stated that whenever the policy became effective, the CBN was ready to react to any second rebound effects of price adjustments.

Mallam Sanusi said that the position of the external reserves had continued to improve, closing at US$34.38billion as of November 17, 2011.

Meanwhile, the Court of Appeal, Lagos Division, on Monday, upheld the judgment of Justice Mohammed Idris of a Federal High Court in Lagos, which declared that CBN governor, Sanusi, had powers to hire and fire bank directors.

It will be recalled that Justice Idris had held in his judgment in a suit filed by some aggrieved shareholders of Union Bank that the CBN governor had power under Sections 33 and 35 of the Banks and Other Financial institutions Act (BOFIA) to hire and fire directors of any bank found to be in grave situation.

Dissatisfied with the judgment, the shareholders, Danson Izedonmwen and Edith Izedonmwen, had through their lawyer, Chuks Nwachukwu, appealed against the judgment, saying that Justice Idris failed to take cognisance of the dangers inherent in allowing the CBN governor, as an individual, to take over people’s investment and to have the power to take over any bank at will by sacking and replacing its management with his appointees, who are answerable to him.

The appellate court, in a lead judgment read by Justice Inyang Okoro, upheld the judgment of the lower court and awarded N30,000 costs against the shareholders.

The appellate court could, however, not give any reason for arriving at the conclusion, saying that the full part of the judgment was not ready at the time of delivery.

Justice Okoro only read the introductory and concluding part of the judgment.

One of the justices of the Appeal Court, Justice Ibrahim Saulawa, said the full judgment was not ready because of “printer’s devil,” as some typographical errors were discovered.

Speaking on the issue, counsel for the shareholders, Nwachuku, said he would not be able to officially react to the judgment, as he was yet to know how the Appeal Court arrived at its conclusion.

He added that he would study the judgment after getting a copy and then take further appropriate step.

The shareholders had noted in their notice of appeal that apart from the dangers of conflicting interest of some individuals, who might want to use the CBN governor to take over targeted banks, such power to hire and fire bank directors would also put the CBN governor in a position of operator and regulator, more so that the Nigerian Deposit Insurance Commission (NDIC) had been empowered under the law to take over failing banks and to protect public interest.

The shareholders in the appeal maintained that Justice Idris committed a grave miscarriage of justice when he held that the word ‘or’ in Section 35 (2)(d) of BOFIA should be read as ‘and’, which, in turn, empowered the CBN governor to remove bank directors and replace them with his appointees.

They argued that the word ‘or’ is a disjunctive article, creating an alternative between removing a director and appointing new directors, adding that the provisions of the section was intended to prevent a situation of total hijack of the management of a bank by the CBN governor.

-Tribunewp_posts