Nigeria to diversify FX reserves

LAGOS: Nigeria's central bank plans to diversify its foreign exchange reserves away from an over-reliance on the dollar and wished to increase its exposure to the Chinese yuan among other currencies, its deputy governor told Reuters on Saturday.

Kingsley Moghalu said the decision had been taken before Standard & Poor's cut the United States' triple-A credit rating on Friday. He declined to comment on the downgrade.

However, he said a prolonged debt crisis in Europe and the United States could affect sub-Saharan Africa's second-biggest economy if the demand for its crude oil exports dwindled and oil prices fell below local budget assumptions, Moghalu said.

Its budget oil price for 2011 is $75 per barrel.

The US lost its top-tier AAA credit rating from Standard & Poor's on Friday, drawing a blast of criticism from its biggest creditor China and deepening investors' alarm over the euro zone crisis.

China has called for a new stable global reserve currency.

"We have been taking steps to balance out our reserve holdings ... we have taken a decision to increase our holding of other currencies including the Chinese yuan," Moghalu said in an interview in the commercial hub Lagos.

Nigeria currently maintains its foreign reserves in US dollars.

Nigeria's central bank said in January it had added the Chinese yuan to a list of currencies that can be used for trade settlement in the domestic foreign exchange market as trade flows with China increase.

China is encouraging countries to use the yuan for trade settlement and to diversify bilateral trade away from the dollar.

Copyright Reuters, 2011