The Central Bank of Nigeria’s latest efforts to adjust the exchange rate policy have baffled investors who say the moves fall short of the currency devaluation they had hoped for and will not lure money back into the economy.
The CBN this week effectively devalued the naira for private individuals by offering them dollars at a rate of 366 naira, instead of the official 305 rate which it has held since last summer at the behest of President Muhammadu Buhari.
On Tuesday it sold dollars at forward exchange rates up to 15 per cent weaker than the official rate, Reuters reported. The move may cement expectations for the central bank to allow the naira to trade at a weaker level in the future. Yet on Wednesday, the bank intervened on currency markets at 304.5 per dollar.
Investors said it was just another bungled attempt by authorities to avoid a much-needed bold devaluation. Without that, they said the country would fail to recover from recession and an investment drought.
Senior economist at NKC African Economics in Johannesburg, Cobus de Hart, said the central bank had been in two minds on how to behave for a couple of years.
“This is one of the key issues – the central bank’s policies are not clear and they continue to confuse both investors and the local population,” de Hart said.
Buhari, an opponent of devaluation, has been on medical leave in Britain for over a month. Vice President Yemi Osinbajo, now acting president, helped usher in last June’s 30 percent devaluation – also while Buhari was on medical leave.
“We don’t know who is calling the shots on this … The vice president seems a lot more liberal on this, which is good, but we are still uncertain where the actual orders are coming from and how independent the central bank is,” de Hart added.
Currency traders in Lagos say they were struggling to understand the new rules, especially when showing quotes to foreign investors looking to buy Nigerian bonds.