As concerns continue to grow among foreign investors over the state of Nigerian economy following the recent $9 billion court ruling, the governor of the Central Bank of Nigeria (CBN) Mr. Godwin Emefiele has vowed to defend Nigeria’s foreign reserves.
The CBN Governor disclosed this while speaking with State House correspondents at the retreat organised for ministers-designates in the Presidential Villa in Abuja on Monday.
The details: According to Mr Emefiele, there are on-going discussions with the CBN counsels, and the bank has been advised that there are sufficient and strong grounds for Nigeria to file a stay of execution and also an appeal to the judgement.
“I am not scared at all and I think it is also important that this question has come up. Since the news about the judgement broke out late on Friday, we have been discussing with our counsels, and they have advised that there are sufficient and strong grounds on the basis of which we could file a stay of execution and also an appeal against that judgement.
“There are certain anomalies in the process leading to the award of that contract which is currently being looked into by the EFCC and I believe that the EFCC themselves have their own investigation reports about that.
“So, we will follow through and aggressively too on ensuring that the execution of that judgement stays and that the appeal succeeds at every level both within Nigeria and abroad.”
The backstory: Last week, A British court granted an Irish Firm, Process and Industrial Developments Ltd (P&ID) the right to seize $9 billion in assets from the Nigerian Government over a failed gas project.
- P&ID, an Irish Firm has been awarded $6.6 billion in an arbitration decision over a failed project to build a gas processing plant in the Southern Nigerian city of Calabar. With the accumulated interest payments, the sum now tops $9 billion, which amounts to 20% of Nigeria’s foreign reserves.
- According to reports, the case dated back to 2010 under the administration of Nigeria’s former President, Dr Goodluck Jonathan. The Nigerian government had struck a deal with the Irish firm to supply gas to a processing plant built and run by P&ID in Calabar.
- Specifically, the deal was supposed to span 20 years. However, the Nigerian government failed to keep its side of the agreement, prompting the firm to seek legal action against Nigeria.
Emefiele’s appeal to investors: While admitting that there are tough times ahead, Mr Emefiele allayed the fears and concerns of the investors over the recent development. The CBN Chief claimed to be making vigorous efforts to defend the bank’s interest. He also promised not to relent in exploring every viable option available.
“It is important for me to use this opportunity to assure our friends, local and foreign investors who called to expressed solidarity with us, not to express concern but to say that there is no need for anybody to worry. We know that the implication of that judgement has some impact on monetary policy and that is why the CBN is going to step forward and very strongly too to ensure that we defend the country and defend the reserves of the Federal Republic of Nigeria.”
Why Emefiele is worried: According to Reuters, legal experts have disclosed that only commercial assets are used for diplomatic purposes, while assets such as the Nigerian High Commission building in central London are not eligible for seizure in this case.
- Although the CBN boss has vowed to defend the external reserves, it remains unclear how Emefiele intends to achieve this should the appeal fails.
- It should be noted that the reserves have been an unconventional tool in the hands of CBN to stabilise the naira.
- Hence, it seems critical times are ahead, as the external reserves have depleted significantly in recent weeks, and taking out $9 billion out of the reserves would be too costly for the Nigerian economy.
- Another critical downside is that investors are quick to ship out their investments with the slightest scare of an economic slowdown in a country like Nigeria. For instance, foreign investors shipped out N257.8 billion between January and June 2019.