The Nigerian central bank banned importers from using the foreign-exchange market for some goods in Africa’s biggest economy as it seeks to conserve external reserves and stabilize the naira.
Forty categories of goods ranging from private jets to rice, wheelbarrows and Indian incense are covered by the edict, according to a statement on the Central Bank of Nigeria’s website. It also stopped Nigerians from using the interbank market to buy Eurobonds and foreign shares. Importers or investors purchasing the listed items “shall do so using their own funds,” the regulator said.
The policy change is “in line with our long held belief that Nigeria cannot attain its true potential by simply importing everything into the country,” Governor Godwin Emefiele told reporters in Abuja, the capital, on Wednesday. “Sometimes policy changes are forced on policy makers as a result of exogenous shocks beyond their control.”
Emefiele and other central bank officials voiced concern at a meeting with lenders last week that removing restrictions it imposed in the last three months of 2014 to protect the local currency may trigger a surge in demand for dollars, according to a person at the meeting.
Faced with a plunge in the price of oil, the source of 90 percent of Nigeria’s exports, the regulator started imposing currency-trading restrictions as it seeks to protect the local unit that has weakened 18 percent against the dollar in the past year.
“The implementation of the policy will help conserve foreign reserves as well as facilitate the resuscitation of domestic industries and improve employment generation,” Olakanmi Gbadamosi, director of the central bank’s trade and exchange department, said in the statement.
The latest move probably won’t placate foreign investors, many of which have been put off buying Nigerian bonds and stocks because of the curbs, according to Viktor Szabo, of Aberdeen Asset Management Plc, which oversees $12 billion of developing-nation debt.
“It will not help,” said Szabo, a fund manager at Aberdeen, which sold all its naira bonds last year. “There’s quite significant pent-up dollar demand.”
Brent crude prices have fallen 40 percent to below $65 a barrel in the past year. The naira gained 0.2 percent to 198.53 per dollar as of 5 p.m. in Lagos on Wednesday.
The currency’s overvalued because of the trading restrictions, with fair value around 220 to the dollar, Szabo said.
“It’s an adjustment which needs to happen, you cannot get away without it,” he said. “If all these measures continue, they’ll probably continue to accumulate this unsatisfied demand. It will not disappear unless oil prices jump to $100 and stay there.”
The nation’s foreign-currency reserves have declined 16 percent to $29 billion this year.
The curb on buying foreign stocks and bonds is “targeted at selected resident outflows and, for the first time, impacting capital account transactions,” JF Ruhashyankiko, an analyst at Goldman Sachs Group Inc., said in an e-mailed note Wednesday.