Nigeria central bank says will defend naira, oil savings dwindling

Nigeria's central bank Governor Lamido Sanusi said on Thursday that bank would continue to seek a stable exchange rate for as long as its forex reserves can support it, but he warned that Nigeria's oil savings were rapidly running out.

"I will defend the naira"-Sanusi

   "My strong view is that a stable currency is absolutely critical for price stability and financial stability in general," he told the Reuters Global Markets Forum chatroom in Davos. He ruled out a devaluation because it would not "not affect the current account balance given the highly inelastic nature of our imports and the dominance of oil."    
   He said Nigeria's oil savings in the Excess Crude Account (ECA) had now fallen to just $2.5 bln, compared with $11.5 bln a year ago, and that until they were replenished there would little room for a policy rate cut below the current 12 percent.
   "We should continue to seek a stable exchange rate for as long as the reserves and monetary conditions can support this," Sanusi said.
meanwhile, the country's  oil savings account has fallen below $2.5bn from $11.5bn at the end of 2012, the central bank said.
The excess crude account (ECA) is used to hold oil earnings above those expected in the national budget.
The fall in the savings account cannot be accounted for by losses from oil theft and pipeline vandalism, the bank said. It urged the government to fully review how the country's oil revenue is handled.
The central bank, which is charged with defending the value of the naira in international currency markets largely through the use of state oil revenues, last year demanded that state-owned NNPC fully account for its handling of the country's oil revenue. NNPC has denied failing to properly account for revenue.
The bank warned of a "continuing decline in oil revenue, rundown of [foreign currency] reserves and depletion [of] excess crude oil savings."
Governments have in the past used the ECA to finance additional spending, including in the run-up to national elections. Nigeria's next national elections are scheduled for 2015.
Nigeria produces 1.97mn b/d of crude.
The country's foreign exchange reserves stood at $43.26bn on 20 January, according to central bank data. The bank assessed the value of the country's main Bonny Light crude at $109.90/bl on 20 January.