Nigeria to Unify Exchange Rates Around Investors’ Window
Nigeria will continue to pursue exchange rate convergence around what is offered in the investors and exporters window, otherwise called nafex, the regulator said.
“Exchange rate unification is moving toward the nafex,” central bank governor, Godwin Emefiele said on a call with investors on Tuesday. People buying dollars from the parallel market are engaged in ‘illegal business’ and ‘corrupt practices’ and the bank will not use the unofficial market as base for convergence, he said.
“The reserve still remains above $36 billion. I would imagine it is enough to make somebody comfortable if you want to do business in Nigeria,” the governor said.
The local currency unit has stabilized at 388 naira to a dollar on the nafex window in the past two months and this is expected to be sustained as oil price recovery leads to higher foreign exchange inflows for Africa’s largest economy where crude exports account for about 90% of export earnings.
The Abuja-based regulator wants to ensure an orderly exit of foreign investors from the country and will meet all obligations, Emefiele said. “Having gone through this in 2015/2016, I am saying there’s no need for anybody to worry as long as you allow us to deal with this issue in an orderly fashion, you will be paid your money,” he said.
Halt in central banks’ dollar intervention on the nafex market since March has resulted in increasing backlog for foreign portfolio investors, Tunde Abidoye, analyst at FBNQuest said in a research note to clients on Wednesday. “The reserves and exchange rate are still under significant pressure.”
The West African nation could avoid a contraction of its economy this year if it stays aggressive with the policies put in place to support growth, according to Emefiele.
Improvement in productivity and harvest season is expected to slowdown inflation in the second half of the year, the central bank head said.
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