Foreign Investors In Nigeria Fear New Central Bank Rules Will Limit Exit

Written by Kevin Mwanza

Dec 24, 2014

Foreign investors in Nigeria are concerned that measures taken by the Central Bank of Nigeria (CBN) to prevent speculation against the falling naira will hinder their ability to sell investments in the country.

The CBN in a continued attempt to maintain the stability of the exchange rate reviewed downwards the daily foreign exchange trading position of individual authorized dealers to zero per cent of shareholders’ funds (unimpaired by losses) from one per cent. The CBN however noted that this was a temporary measure.

Subsequently, another circular was released last week that funds purchased from banks by their respective customers at the autonomous/interbank foreign exchange market must be utilised within 48hours from the date of purchase or be returned to the CBN for re- purchase at the bank’s buying rate.

The immediate effect of the first circular was to ground forex transactions at the interbank market as traders reported a lack of liquidity in the market.

“The reality is that if you have $100 million dollars invested in Nigeria, in the current environment it would probably take you a year to source that foreign exchange,” head of African strategy at Standard Chartered Plc, Samir Gadio, told Bloomberg.com.

“Some people would argue that the lack of foreign-exchange liquidity these measures cause could implicitly be compared to capital controls, although they’re not formally.”

The naira gained 0.7 per cent to 183.55 per dollar in Lagos. There were only six trades between 7 a.m. and 12:30 p.m., compared with almost 700 in the same period a week earlier, according to data compiled by Bloomberg. The currency has slumped 11 per cent this quarter as Africa’s biggest oil producer, which derives 95 per cent of export earnings from the commodity, struggles to deal with Brent crude prices collapsing to about $60 a barrel from over $111 in June.

The central bank’s measures are temporary and investors can still enter and exit Nigeria “very freely,” Ibrahim Mu’azu, a spokesman for the regulator, said.