Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, met fund managers in London last week to lure investors back into the local naira currency, Reuters reported two banking sources as saying yesterday.
Emefiele told investors that currency stability would continue, a fund manager and a banking source said. The naira weakened to 364 last week as oil prices fell.
The naira has come under pressure at the investors and exporters forex window in recent weeks due to a decline in oil prices as well as a drop in yields, which led to a sell off by foreign investors. The development led the CBN to hold unscheduled Treasury bill auctions at higher rates last week in its bid to lure foreign inflows.
“FX pressures have intensified as global risk-off sentiment incentivises some portfolio reversals, and the UK judgment could add further fuel to the fire,” said Cobus de Hart, senior economist at South Africa’s NKC African Economics.
“Worryingly, the central bank is employing unconventional tools more regularly to try and keep the naira stable and safeguard reserves, and risk exists … which could ultimately come at the cost of slower growth and higher inflation,” De Hart said.
Yesterday, traders raised their secondary-market bids for one-year treasury bills to 14 per cent from 11 per cent last week as the naira weakened, and bid-offer spreads doubled in volatile trades.
The naira has been quoted at 364 per dollar for foreign investors at I&E window since last week from 363.50, as liquidity dried up on the forex market.