Nigeria is diversifying its euro holdings away from southern
European government debt into French and German government
bonds, amid mounting fears over the currencys slide.
Any move out of the currency would only be considered over
the longer term, Lamido Yuguda, acting director of the reserves
management department at the Central Bank of Nigeria, said.
He said: We are very concerned about structural
problems of the euro.
We used to think of risk more as private sector
obligations, but now there are risks in European government
paper, so we need take action accordingly, he told
Emerging Markets in an interview in Abidjan.
Nigeria is Africas second largest holder of foreign
exchange reserves, with $39.8 billion worth 15% in
euros, 80% in dollars and the rest in other core currencies
including Japanese yen and British sterling, Yuguda said.
Nigeria would snap up safer German Bunds and French government
bonds while increasing the proportion of euro-denominated
assets in Bank for International Settlement-approved private
But the overall level of euros in Nigerias reserve
portfolio would only change in the longer term, as it reflects
Nigerias trade with the eurozone bloc, Yuguda said. He
added: It will be too early to take precipitous action,
without seeing how euro leaders address this long-term
problem. Nigeria no longer had exposure to Greek
sovereign debt, he added.
On May 12, the South Africa reserve bank said it had decided
to keep interest rates unchanged, mindful that market jitters
over eurozone sovereign debt will trigger volatility in the
Benno Ndullu, governor of the Tanzanian central Bank, said:
The euro is under pressure and there are a lot of worries
over medium-term economic and financial outlook in the
eurozone. He said Tanzania has very marginal holdings of
southern European government bonds.
Nigeria will announce a review of its reserve management
strategy at the end of the year. Yuguda said the currency
composition in the portfolio is unlikely to materially change
in the next two years. The US dollar would remain the
overwhelming currency in Nigerias reserve portfolio
despite concerns that US bond yields will spike as the US
government bombards the market with more paper, he said.
We dont have any blind attachment to the dollar.
We are pragmatic. ... It is the currency of our imports and our
intervention currency, and if financial market volatility
returns, you need the dollar to intervene and provide
On asset allocation, Yuguda said Nigeria would like to
decrease the proportion of assets invested in short-term
money-market funds, currently 45%, and invest more in
longer-term government bonds.