Nigeria’s clampdown spurs naira gainsComment on this story
Lagos - Tighter rules for Nigerian money changers that take effect this week will help the central bank shore up reserves and bolster the naira before next year’s elections, according to Vetiva Capital Management.
Money-changers have until tomorrow to meet raised minimum capital requirements, according to revised directives published July 8 on the Abuja-based Central Bank of Nigeria’s website.
License fees will also increase, it said.
The number of traders seeking dollars from the regulator has depleted foreign-currency reserves of Africa’s biggest oil producer, which are down 17 percent from a year earlier, according to the institution.
The moves are “aimed at reducing the speculative demand for foreign exchange over the election cycle,” Pabina Yinkere, head of research at Lagos-based Vetiva Capital Management, a stock broker and money manager, said in an e-mailed response to questions yesterday.
“We view this as positive for the currency if properly implemented, and if successful, could prevent any aggressive tightening of monetary conditions.”
The naira gained 0.1 percent to 161.90 per dollar as of 9:05 am in Lagos for a 0.6 percent rise this month.
The currency is advancing for the third straight month as foreign-currency reserves climb to the highest since March following an increase in oil output.
Crude is the nation’s biggest source of foreign currency.
The central bank sells dollars to lenders and money-changers twice-a-week at auctions where it keeps the naira at 3 percent above or below 155 per dollar.
Between January and March, reserves dropped for 48 straight days, the longest on record.
The naira also hit a record low after central bank Governor Lamido Sanusi was suspended, spurring speculation that the regulator will change the peg.
A devaluation may now be off the table until after the election, Yvonne Mhango, a sub-Saharan African economist at Renaissance Capital, said by phone from Johannesburg yesterday.
“I don’t expect a devaluation in the short term,” she said.
“Especially going into an election year, what will help is if they can sustain policy as it is today.” - Bloomberg News