February 16, 2015/Bloomberg
Nigeria’s currency is still overvalued and it needs to depreciate more before foreign investors are tempted to buy naira assets again, according to Aberdeen Asset Management Plc.
“You’re probably looking at something closer to 225 or 230” per dollar as the fair rate for the naira, Kevin Daly, who helps manage $13 billion of developing-market debt at Aberdeen said by phone from London. “Clearly the central bank is trying to prevent a larger devaluation before the elections.”
The currency of Africa’s largest oil producer rose 2.3 percent to 198.83 per dollar by 5:01 p.m. in Lagos, a second day of gains and the most since Jan. 8. The appreciation is largely a result of measures taken by the Central Bank of Nigeria that have crushed foreign-exchange trading before elections next month, Daly said.
When those moves failed to stem the slide in the naira, which has weakened 19 percent in the past six months to become the worst performer among 24 African currencies tracked by Bloomberg, it introduced trading curbs.
The restrictions led JPMorgan Chase & Co. to consider dropping Nigeria from its local-currency emerging-market indexes tracked by over $200 billion of funds. The New York-based lender said it will make its decision by mid-June.
Elections Delay
The naira fell 4.7 percent last week, the most since Dec. 2008, after presidential elections scheduled for Feb. 14 were delayed by six weeks until March 28. This prompted the Abuja-based regulator to sell around $350 million dollars on Friday at an unscheduled auction at 198.50 per naira, wider than its target band of 159.60 to 176.40.
Central bank spokesman Ibrahim Mu’azu said he would respond to questions later when contacted on his mobile.
“If you are an offshore investor in Nigeria, you are probably in there for a very short trade, hoping that the central bank continues to defend the currency at these levels,” Daly said. “Maybe the gamble is that they’ll hold it until March. But it’s inevitable that it will weaken at some point.”
