Standard Bank says allowing weaker naira is ‘right thing to do’
Standard Bank Group Ltd.’s chief said the Nigerian central bank’s moves to revamp the nation’s foreign-exchange market and allow the naira to weaken are necessary to create order.
“If the authorities stick to their orthodoxy and they allow the naira to free float on the basis of economic fundamentals, one would expect it to weaken a little bit further, and that is just the rational thing to do,” Chief Executive Officer Sim Tshabalala said Thursday. “Obviously, that has got the impact on inflation, but I think that the authorities are quite ready to deal with those consequences.”
Nigerian President Bola Tinubu has introduced a raft of measures since coming into office in late May to attract investors back into the economy and support the naira, which has lost more than 70% of its value against the dollar since last year. They include relaxing foreign-exchange controls, easing rules on international money transfers and reducing the gap between the central bank’s policy rate and yields on the short-dated paper it sells at auctions.
The central bank also hiked interest rates by a much-bigger-than-expected 400 basis-point rate in February as it sought to bring inflation down from a three-decade high and restore confidence in the battered naira.
“The balance of our excess cash reserve ratio were repaid by the authorities,” Tshabalala told Bloomberg Television’s Jennifer Zabasajja in an interview. “Just another step in the direction of normalizing and introducing orthodoxy in the environment.”
The country is already benefiting from improving investor perception.
Foreign portfolio investor asset purchases exceeded $1 billion in February, bringing total receipts so far this year to at least $2.3 billion, Hakama Sidi Ali, a spokeswoman for the central bank, said last week. That compared with $3.9 billion for the whole of 2023. Overseas remittances rose more than fourfold to $1.3 billion in February from a month earlier.
Growing Business
Standard Bank will focus on growing its business in Africa as it seeks a greater share in the 20 markets where it operates on the continent, Tshabalala said.
East Africa is “an exciting region because of the increased rational policy formulation and execution there,” and continued orthodoxy in Ghana and Nigeria “will also be creating opportunities for us,” he said.
The bank’s rest-of-Africa business overtook South Africa — its home market — as the biggest driver of growth in the year to December, but there is “nothing on the horizon” in terms of acquisitions this year, Tshabalala said.
“The countries of Africa are growing faster, and therefore we hope that they can continue to vote with their feet and with their wallet as we see the positive impact,” Yinka Sanni, Standard Bank’s CEO for Africa regions, said in a separate briefing Thursday.
