Nigeria Central Bank Urges "Don't Panic" As Banks Halt Lending To Each Other

Tyler Durden's picture

When the head of the central bank utters the two words "don't panic" you know the economy, currency, and financial system is in trouble...and that's just what Nigerian central bank Governor Godwin Emefiele just did. Following government intervention to sweep cash from local to central accounts, banks have panicced. As Reuters reports, overnight interbank lending rates spiked to 200%, which Emefiele opined was "a momentary action... just sentiment," but the interbank naira market was paralyzed for a third day on Thursday, with banks unwilling to lend to each other, even when rates fell back to 20-30%.

 

O/N rates spiking...

 

And CDS imply a notable devaluation is looming...

Charts: Bloomberg

As Reuters reports, Nigerian central bank Governor Godwin Emefiele ruled out a naira devaluation on Thursday and told people not to panic about a government order which risks draining billions of dollars from the financial system.

In an interview with Reuters, Emefiele said he was ready to inject liquidity if needed into the interbank market, which dried up this week following the directive to government departments to move their funds from commercial banks into a "Treasury Single Account" (TSA) at the central bank.

 

The policy is part of new President Muhammadu Buhari's drive to fight corruption, but analysts say it could suck up as much as 10 percent of banking sector deposits in Africa's biggest economy - playing havoc with banks' liquidity ratios.

 

With global oil prices tumbling, banks and companies are already struggling with the consequences of a dive in Nigeria's energy revenues that has hit the naira currency and triggered flows of capital out of the country.

 

Then JP Morgan kicked Nigeria out of its influential Emerging Markets Bond Index last week due to restrictions that the central bank imposed on the currency market to support the naira and preserve its foreign exchange reserves.

 

Since taking office in May, Buhari has vowed to rein in Nigeria's dependency on oil exports which account for 90 percent of foreign currency earnings. However, he has faced criticism from investors for failing to appoint a cabinet yet or outline concrete policies.

Amid confusion over the implementation of the single account policy, overnight interbank lending rates spiked to 200 percent, but Emefiele denied the policy had provoked a liquidity crisis.

"There is no shortage of liquidity," he said, pointing to an oversubscribed sale of treasury bills on Wednesday. "A spike is a momentary action. It's sentiment."

"I do not think there is any need for anybody to panic," he added.

Nevertheless, the interbank naira market was paralyzed for a third day on Thursday, with banks unwilling to lend to each other, even when rates fell back to 20-30 percent.

In a sign of the financial ructions, commercial bank cash balances with the central bank that are normally earmarked for foreign exchange or bond purchases plunged to 173 billion naira on Thursday from 486 billion two days ago.

 

Analysts had predicted that the TSA edict could suck 1.2 trillion naira ($6 billion) out of the commercial banking system. Emefiele said the amount would be less than one trillion, although he did not give details beyond saying the measure was designed to root out graft.

His comments did not instill confidence in the new rules among economists.

"It's an example of the government deciding on a policy without thinking through the mechanics of how its implementation will work," said Alan Cameron at Exotix, a London-based specialist in frontier markets - a higher risk subset of emerging economies.

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LetThemEatRand's picture

Nigeria?  That's racist.

Creepy A. Cracker's picture

They need their missing village idiot - Dear Leader Obama - back to take care of these kinds of problems.

 

(Yes, I know that Dear Leader is Kenyan but Nigeria will do...)

wee-weed up's picture

 

 

What?... So, you're telling me the Nigerian Barrister who just promised me by email a million dollars in a local bank account is not going to follow through and deliver?

Oh noes.... Please say it isn't so!

Urban Redneck's picture

I got one of those emails too, but it was from a Nigerian Prince who I actually know.  He wasn't amused half as amused as I was.  

Just something to keep in mind as the industry globalizes and your email address is compromised for the cause...

MalteseFalcon's picture

Tsunami rising on the periphery. Will head toward the center and swamp everything.

ZIRP? NIRP? QE?

Ain't gonna matter.

Son of Loki's picture

I like the one that starts, "I am Rev Father August Goodluck. by name, a diplomat by profession."

 

Always in the $30-$50 million range. I am surprised some Nigerian has not written a book about their scams.

SmedleyButlersGhost's picture

There is a book kindest good sir. Please pleasure me with the details of your bank account and I will wire it to your good self.

Kindest Pleasuring Regards

StychoKiller's picture

Estimated Sir,

I hope this mail encounters you in good health and much largeness of spirit. I am Maneki Neko, a residence of Doggone. Presently, I am living refugely in basement with large varietys of flora and faunas, such as Ugly Spider, Dusty Bunny, Hairy Centiped, and many other poorly but deserving individual.

I am a victim of badly clean and of descent from Harald Bluetooth, Vicking nobility, and a Choctaw womanly of whom little can be known, because she is dead.

I am unsure but I think Harald Bluetooth, he is dead too. He died of death. It is a sad. I was in the basement so who can be knowing what have happen? It is not of my fault, this is all.

I had a singular shock and trauma, which compel me to move from Basment to upper levels, in order to have beer and use of bathroom facility. I would have furthered my cleaning but I have need of beer.

I have always been of work. I am contacting you now because of the present difficult in work, I do not want of work a more but only to drink beer and count to money incoming. This would mean of at least eleven United States dollars (US$11), to buy of case a beer. For now I am having every information and document needed for the
clearance of any moneys for peoples send me, for Beer! You will no doubt be adequately compensated with the knowing that your Money have bought Beer and Happiness for Neko, and you may rest easily in knowledge of clean basment.

Your positive response will give me the greatest joy and relief. God bless you.

Regards,

Maneki Neko

cnmcdee's picture

You forgot the ALL-CAPS. All Nigerian letters have to do ALL-CAPS when they describe the money in excruciating detail. :) 

 

Dead Canary's picture

"Nigeria?  That's racist."

 FYI: They're thinking of changing it to "Sambonia"

nosam's picture
nosam (not verified) Sep 17, 2015 10:07 PM

Oil prices are crushing Nigeria. Please do panic.

NoDebt's picture

Agreed.  Panic is clearly not called for in this situation.

 

yogibear's picture

Yellen admits today that interest rates may stay at zero forever!

And QE to infinity.

The Central Banks have all gone the Zimbabwe economic plan. It will take a while longer to realize the US will just keep on stacking it's debts.

TimmyS's picture

seems normal to me.

rogerrabbithole's picture

Who wants to be a banker in Nigeria? It's far more lucrative to sit around coffee houses calling gullible senior Americans. 

 

Stormtrooper's picture

is that where I've been sending all of those checks.  Still waiting for my rich uncle's estate to send me that big check in return.

Ajax_USB_Port_Repair_Service_'s picture

I quit lending to my bank last month. Seemed like the prudent thing to do.

TeamDepends's picture

At Exotix, we invest your "money to burn" in hyper-risk environments. We guaranty a helluva ride, not a ROI. But who knows, you might make a few bucks, voodoo skulls, tiger penises; you might come out with your own south sea island, a warehouse full of coca leaves, Hillary's hard drive. The possibilities are endless!

lehmen_sisters's picture

Don't give up Nigerians, hedge with silver.

Monetas's picture
Monetas (not verified) Sep 17, 2015 10:27 PM

Niggeria won the lottery .... with oil .... they blew the money .... and they're still fucked .... they prolly still get a shitload of foreign aid .... from Obama .... so, don't feed the bears .... don't give nigers lump sum lotto payouts ?

GeorgeGould's picture

A central banker urges not to panic. You know what that means. (Like in: "No capital controls. No devaluation. No banking closures.")

leftcoastfool's picture

Wake me when this happens in Japan...

silverer's picture

Everything's always under control in Nigeria.  Just make sure you have something to give when the hand comes out.

Ms No's picture

At least Nigeria has oil, countries on the margins should be going down like dominoes by now.  The TPTB are going to cause half the globe to start moving at this rate.   

mastersnark's picture

Nigeria? Who cares what happens in Nigeria...

gmak's picture

THink of Nigeria as that funny freckle that no one thinks about until it starts to grow and becomes a cancer.

 

A more important question is: How mich Nigerian bank debt is held by other foreign banks?  Think back to Latam debt in the 80's. It was small compared to the dominos that have started to fall.

Lucky Leprachaun's picture

Damn!  Does this mean the Nigerian Prince will be delayed in lodging that $1 million into my bank account?

gmak's picture

tick tock, bitchez.

roddy6667's picture

Nobody cares what happens to some steatopygic aborigine backwater country. Not until America copies their monetary policies.

ToSoft4Truth's picture

“Don’t Panic”

Detroit Police tell us ‘don’t panic’ when criminals that followed us home from the downtown casinos are robbing us in our driveways.

“Don’t Panic”

To Hell In A Handbasket's picture

The Brits found oil in Nigeria in 1956 and via Royal Dutch Shell, have been sucking those Nigerian teats for almost 60 years of corporate welfare. Wiki-leaks exposed Shell for the disgraceful company it is. Not only did it boast of spying and having government informants within every Nigerian ministry, in 2005 Shell Nigeria was exposed for ZERO philanthropy in the country. It spent not a fucking penny on local causes. Not even a Kit for a disabled football team, but they did give a few million to an Israeli Maccabi organisation and when faced with such an embarrassment, Shell belated gave money to a few Nigerian sports and housing charities.

The problem with Nigeria(and I visit there due to my work) is the chronic(and I'm being polite) corruption. The definition of TRAITOR, should read.....Any middle ranking Nigerian government official. The Nigerian government and population suffer at the hands of their own central bank and like all African central banks, they rarely loan to the population to invest in businesses, frequently go bust and basically exist just to take local depositor savings and foreign reserves(money sent home by relatives living and working abroad). And like the rest of the world, African banks aren't owned by the indigenous, they are owned by the TRIBE.

 

So anybody crying about the yoke the FED has placed around the neck of the American population and its indebted servitude should count their lucky stars,, because IMF and World Bank indebtedness and shock therapy was practiced and perfected on the Africans first. Sovereign asset forfeiture was perfected on the Africans and reinforced through western politicians and our legal system. Unfortunately and not a surprise, those gloating and laughing at the Nigerians, fail to see the obvious and that is, what we see happening in Nigeria will undoubtedly come to the west. Who thought the money changers would ever pray on us(like in Greece) with IMF indebted African style practices, with Sovereign asset forfeiture of Greek state assets, capital controls for the plebs and depositor bail ins? So laugh away you retards, because it can never happen to us can it.

 

2muchtax's picture

if being in Nigeria doesn't cause you to panic, a currency crisis certainly wouldn't.