Paul Wallace London
FOREIGN investors in Nigeria are concerned that measures taken by the central bank to prevent speculation against the falling naira will hinder their ability to sell investments in the country.
“The reality is that if you have $100 million (R1.15 billion) invested in Nigeria, in the current environment it would probably take you a year to source that foreign exchange,” Samir Gadio, the head of African strategy at Standard Chartered said by phone from London. “Some people would argue that the lack of foreign-exchange liquidity these measures cause could implicitly be compared to capital controls, although they’re not formally.”
The Central Bank of Nigeria issued a circular on its website on Saturday that any dollars bought from banks in the interbank market had to be used within 48 hours or sold back to the Abuja-based regulator. This followed a rule that cut banks’ maximum foreign-exchange net-open position at the end of each business day to zero from 1 percent of shareholder funds, which brought trading to a near halt.
The naira has slumped 11 percent this quarter as Africa’s biggest oil producer, which derives 95 percent of export earnings from the commodity, struggles to deal with Brent crude prices collapsing to about $60 a barrel from over $111 in June.
The central bank’s measures were temporary and investors could still enter and exit Nigeria “very freely”, Ibrahim Mu’azu, a spokesman for the regulator, said.
The bank could be forced to devalue its target exchange rate of 168 naira per dollar, plus or minus 5 percent, before elections in February, an Africa strategist at Barclays Absa Capital unit said.