Nigeria’s currency which has come under pressure fell to 361 against the US dollar at the parallel market on Tuesday, as traders and investors continued to await
details of the proposed flexible foreign exchange policy from the Central Bank of Nigeria.
The Naira stood at 357 against the greenback on Monday at the unofficial market, down from 355 on Friday, foreign exchange traders said.
The value of the local currency dipped further as customers, trying to hedge against a possible currency depreciation when the CBN clarifies its new forex policy, snapped up every available dollar from retail outlets, according to Reuters.
But Nigerian officials said they are still working out the details of a new currency policy and may make an announcement within the next month, according to bond investors who met with a delegation led by Finance Minister Kemi Adeosun in London on Tuesday.
When asked how long before a more flexible foreign-exchange regime was unveiled, investors were told it would probably be ”days or weeks,” said Kevin Daly, a money manager at Aberdeen Asset Management Plc, who attended the talks. Aberdeen has sold all its Nigerian government debt in response to the introduction of capital controls. Nigerian authorities said they’re ”having discussions, including with local banks,” Daly said by phone from London.
Central bank Governor Godwin Emefiele has pegged the naira at 197-199 per dollar since March 2015, even as other oil producers from Angola to Kazakhstan have let their currencies drop amid a rout in crude prices since mid-2014. Capital controls imposed by Emefiele, with President Muhammadu Buhari’s backing, have sent the black market rate plunging to 360 per dollar and caused foreign investors to flee.
Emefiele said on May 24 after the last Monetary Policy Committee meeting that a new foreign-exchange system would be announced “in the coming days.”
The President, Association of Bureau De Change Operators of Nigeria, Alhaji Aminu Gwadabe, said, “Dollar demand has increased due to uncertainty around the central bank’s forex policy.
“Most firms and individuals that normally sell dollars to retail currency dealers are holding on to the cash.”
The CBN had recently said it would abandon its naira peg to the dollar and introduce a flexible currency regime. It has not said how this will work, a situation that has unsettled investors who are worried about getting caught in the middle of a devaluation.
Analysts and traders had on Monday linked the drop in the value of the naira to the mounting fears among traders and investors over the flexible exchange rate policy proposed by the CBN.
They said the continued delay by the central bank in releasing the blueprint for the planned flexible exchange rate policy was fuelling hoarding and speculation in the forex market.
The CBN’s Monetary Policy Committee had two weeks ago announced the plan to adopt a flexible exchange rate. The Governor, CBN, Mr. Godwin Emefiele, said the blueprint for the proposed policy would be released soon.
The delay has, however, caused the stock market to record huge losses after recording landmark gains following the announcement of the plan to adopt the policy.
The central bank banned dollar sales to retail Bureaux De Change in January and reduced supply at its official interbank forex market in an effort to conserve reserves, now at their lowest level.