Pressure on Naira Seen Easing by Nigeria Central Bank After VotePaul Wallace
Portfolio inflows to Nigeria jumped since last month’s presidential elections, easing pressure on the currency of Africa’s biggest oil producer, according to the central bank.
“There is more confidence that the economy will grow as the outlook of foreign investors is very upbeat,” Emmanuel Ukeje, director of financial markets in Abuja at the Central Bank of Nigeria, said in an e-mailed response to questions on Monday. “The inflows will be sustained.”
Nigerian bonds and equities surged after President Goodluck Jonathan conceded defeat to former military ruler Muhammadu Buhari following the March 28 and 29 vote, soothing investors’ concerns about a disputed result in a country with a history of election-related violence.
The Nigerian Stock Exchange All Share Index rose for a third day on Monday to the highest since April 2 as the country’s capital markets recover from an almost 50 percent drop in Brent crude prices since the end of June. The naira has fallen 18 percent against the dollar in that period, while average local-currency bond yields have climbed more than 320 basis points to more than 15 percent.
Buhari’s All Progressives Congress beat Jonathan’s Peoples Democratic Party, in power since the end of army rule in 1999, by 15.4 million votes to 12.9 million in a vote described by the European Union as generally peaceful and fair.
“It is expected that the pressure on the naira will abate following the peaceful conclusion of elections,” Ukeje said. “Although other contending factors like low oil prices in the international market still affect the availability of foreign exchange, the pressure should now reduce.”
The naira rose less than 0.1 percent to 199.05 at 4:12 p.m. in Lagos. The central bank has been trying to bolster the currency since last year by limiting foreign-exchange trading and selling down its foreign reserves. The reserves stood at $29.6 billion on April 9, central bank data show. That’s the lowest in at least a decade, according to HSBC Holdings Plc.
The restrictions have left the currency overvalued and deterred some foreign investors from re-entering the country, according to fund managers including M&G Ltd., BlackRock Inc. and Investec Asset Management.
The central bank hasn’t decided whether to remove them now that the presidential and local elections, held on April 11, are over, said Ukeje.
“Our future responses would be premised on our judgment of where things stand in these markets vis-a-vis our objective of maintaining stability,” Ukeje said. “The bank is currently satisfied with the interventions at the interbank market and the stability in the foreign exchange market.”