Manageable Challenges For CBN Following Sanusi Suspension
BMI View: The relative stabilisation of the naira and a decline in bond yields over recent days confirm our view that initial financial market weakness was a knee-jerk reaction to the suspension of Central Bank Governor Sanusi Lamido Sanusi. Indeed, we continue to believe that the fundamentals underpinning the markets have not been materially altered. We also believe that concerns over the independence of the central bank have been overstated. The biggest challenge for the authorities will be reassuring market participants that prudent monetary policy will prevail under the new central bank leadership.
After Nigerian financial markets initially showing signs of panic following the suspension of Central Bank Governor Sanusi Lamido Sanusi on February 20, relative stability has been restored. The naira, which declined from an open of NGN164.00/US$ to as low as NGN169.00/US$ at one point on February 20 before trade was suspended, has recovered to trade at NGN165.25/US$ at the time of writing on February 28.
Short end government debt yields also moved higher following the announcement of the suspension but these have subsequently moved lower, back to where they were trading prior to the news.
|Naira Partially Recovered|
|Nigeria - Exchange Rate, NGN/US$|