Lagos - Foreign investors are warming to the
foreign-exchange window that Nigeria
opened last week to ease a severe shortage of dollars, according to the head of
the trading platform overseeing it.
The naira’s depreciation in the window to almost the same
level as the black-market rate means the new market is already “nearing
equilibrium,” according to Bola Onadele, the chief executive officer of
Lagos-based FMDQ OTC Securities Exchange. The central bank is ready to supply
dollars to bond and stock investors, even for trades of as much as $100
million, he said.
“There’s already been interest from portfolio investors
because they can see that the new window will have buyers and sellers
determining the rate,” Onadele said in an emailed response to questions on May
1. “The banks are talking to portfolio investors. Volumes will build up.”
The so-called Investors’ and Exporters’ FX Window, which started
on April 24, is the central bank’s latest attempt to lure back investors who
fled in the past two years, exacerbating a crisis that caused Nigeria’s economy
to shrink in 2016 for the first time in a quarter century.
Read also: Forex window in Nigeria for investors, exporters
The idea is that by creating a market for some types of
investment transactions, policy makers can satisfy calls to float the currency
without risking an inflationary spiral that may come from devaluation.
The naira opened on Monday at 380.31 per dollar in the
window. That’s about 17 percent weaker than the interbank rate of 315 and close
to the 390 on the black-market, which many Nigerian businesses were forced to
utilize as hard-currency supplies through official channels dried up.
Transactions eligible for trading in the window include those for loan
repayments, interest payments, capital repatriation and remittances.
While Nigeria
last year allowed its currency to weaken on the official interbank market, it
stopped short of allowing a free float as the central bank intervened to
bolster the naira. Investors, concerned that another devaluation may be on the
cards, have stayed on the sidelines. Nigerian stocks have declined 33 percent
in dollar terms in the past year, the worst performance globally, according to
data compiled by Bloomberg.
Onadele, a former chief trader at Citigroup Inc.’s Nigerian
unit who criticized the central bank last October for leaning on dealers not to
let the currency fall, said this time around Governor Godwin Emefiele was
relaxed about the weaker rate.
“The governor isn’t calling up, worrying about the rate,”
Onadele said. “The central bank is ready to sell into this window, via the
commercial banks. Any foreign portfolio investor that wants to leave Nigeria will
get its money.”
Bond and stock investors should disregard the other exchange
rates that now exist in Nigeria,
with the central bank charging businesses different prices for foreign-exchange
depending on their needs.” Foreign portfolio investors should ignore the
multiple exchange rates,” he said. “This new window is the relevant one that
applies to them.”
BLOOMBERG