Nigeria’ s efforts to shore up the naira are crushing foreign-exchange trading.
There were five trades in the naira
during the 2-1/2 hours through 11:30 a.m. in Lagos, compared with 380
trades on December 16, according to data compiled by Bloomberg from at
least 42 local and international banks. The Central Bank of
Nigeria (CBN) last week said lenders must clear positions daily after
previously being allowed a net-open position of 1 percent of shareholder
funds. It also ordered dollars bought from banks be used within 48
hours or sold back to the regulator.
“The perception has undoubtedly been
left by the central bank that these are capital controls,” Ayodele
Salami, who oversees about $200 million of Nigerian equities as chief
investment officer of Duet Asset Management Ltd., said by phone
from London.
“It creates more volatility.” The slump
in trading shows how Nigeria is struggling to curb currency declines as
crude oil’s 50 percent slide from this year’s high hurts producers from
Saudi Arabia to Venezuela. The central bank’s steps stand in contrast to
Russia, where the
world’s largest energy producer has resisted capital controls, last week raising interest rates by the most in 16 years to stem a slide
in the ruble.
world’s largest energy producer has resisted capital controls, last week raising interest rates by the most in 16 years to stem a slide
in the ruble.
The naira strengthened 1.6 percent to
N182.75 per dollar by 11:38 a.m. in Lagos, paring losses this quarter to
10 percent, the most
in Africa after Malawi’s kwacha.
in Africa after Malawi’s kwacha.
“Liquidity has collapsed,” Samir Gadio,
head of African strategy at Standard Chartered Plc in London, said in an
e-mail on Monday. “There is still no activity in the
foreign
exchange market following last week’s regulatory measures.
The risk with the current situation
is that the black-market rate may soon diverge significantly from the
interbank foreign-exchange rate.”
Policy makers in Nigeria, which gets 70 percent of government revenue and almost all export earnings from oil, have proposed spending cuts and last month raised interest rates 100 basis points to a record 13 percent in a bid to stem capital outflows and defend the naira.
Policy makers in Nigeria, which gets 70 percent of government revenue and almost all export earnings from oil, have proposed spending cuts and last month raised interest rates 100 basis points to a record 13 percent in a bid to stem capital outflows and defend the naira.
The central bank on November 25 also
moved the naira’s official peg for twice-weekly auctions to a midpoint
of N168 per dollar from N155 and widened its trading band to 5 percent
either side from 3 percent.
“Because the central bank is taking
different measures almost every day, it looks as though it’s losing
control,” Stuart Culverhouse, chief economist at frontier-markets
investment company Exotix, said by phone.
“That’s the bigger problem for
investors.” Steps taken by the central bank are “short term” to
stabilise the market, spokesman Ibrahim Mu’azu said by phone from the
capital, Abuja, declining to comment further.
The efforts do not amount to capital
controls, Charles Robertson, global chief economist at Renaissance
Capital Ltd. in London, said by phone.
Nigeria has had to take
different measures to Russia because it is “more fragile,” more
dependent on oil and faces elections in February, which makes it
harder to enact monetary policy, he said.
Dollar demand may be “temporarily high”
before the vote and should ebb with the holidays approaching,Richard
Segal, head of emerging-markets credit strategy at
Jefferies International Ltd. in London, said by e-mail.
The central bank may lift the rules in a month, provided there are no more oil shocks, he said.
No comments:
Post a Comment