17 July 2016, Lagos – The Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele flew to Britain and the United States this week to try to lure back investors scared off by the plunge in oil prices and resulting financial turmoil, a central bank official said on Friday.
The central bank last month bowed to foreign pressure to remove the 16-month-old 197-per-dollar peg on the naira it had brought in to try and control its fall as crude prices plummetted.
Investors welcomed the move but many said they were still steering clear until Africa’s biggest economy shows signs of concrete recovery.
Trade has been thin and dollar liquidity tight, leaving the central bank as the main supplier of hard currency.
Emefiele and the Deputy Governor (Economic Policy), CBN, Dr. Sarah Alade held meetings with investors in Britain and the United States, a central bank official said.
“It was more like a roadshow to get investors back into the country,” and authorities were particularly keen to boost dollar liquidity, he told Reuters.
Meanwhile, the spot rate of the naira depreciated to N295.25 to a dollar on the interbank market as the currency recorded its lowest level since the new Nigerian Interbank Foreign Exchange (NIFEX) was introduced. It was gathered that the central sold dollars to try and boost liquidity on the interbank market as demand pressure surged.
Traders said lack of dollars had curbed activity since the peg was removed, leaving the central bank as the main supplier of hard currency.
On Friday a total of $12 million traded on the interbank market at an average rate of N290 naira, with traders attributing the sale to a central bank intervention.
“The naira is weaker because of liquidity,” one trader said.
Other past suppliers of dollars, including oil firms, are now selling part of their hard currency directly to petrol importers under an arrangement with the government, traders said.
In non-deliverable forward markets, the one-month naira-dollar forward were quoted at N300. The one-year contract fell as low as N347 per dollar.
Also, on the parallel market, the naira fell to N365 to a dollar, yesterday, weaker than the N363 to a dollar it was on Thursday.
Economists are demanding that Nigeria allows the naira to find its true level so that offshore investors who are on the sidelines waiting to see where the naira settles can come back to the country.
The Emir of Kano and former CBN Governor, Alhaji Muhammad Sanusi II, on Thursday said the flexible exchange rate regime recently introduced by the central bank was not being fully implemented, just as he warned that targeting a pegged rate will not resolve the current forex problem.
He urged the central bank to allow the forces of demand and supply to determine the true value of the nation’s currency, in line with the flexible exchange rate policy.
“There is a fantastic document by the central bank on the flexible exchange rate. We need to implement that document properly. So long as the implementation is not total and faithful to the document itself, you would have residual market risks.
“You have to let the market decide where the naira is going to be, to start with, before inflows come in and then when the inflows are in, you have an appreciation of the naira.
“So you have to live with a devaluation to N300/$1 plus and then it will firm up to N270/$ or N280/$1 or whatever. But so long as you target a rate of N280/$1, you are just moving the peg,” he argued.
He, however, pointed out that with the new forex policy, the central bank had been able to reduce the arbitrary opportunities in the market as well as improved its liquidity situation.
Speaking further on the current economic downturn and comparing it to the 2008-2009 situation, he said the volatility in the commodities’ market was worse then, compared to the current situation.