Citigroup Inc has predicted that Nigeria, Angola and Kenya will attract more foreign capital flows, despite depreciation in their currencies.
The naira Monday exchanged at N915 per dollar at the parallel market and closed at N772 per dollar at the Investors and Exporters (I&E) window.
Citigroup’s position comes barely a week after global financial service firm, JP Morgan, stated that Nigeria’s net foreign exchange (forex) reserve was estimated to be around $3.7 billion, much lower than the net figure of $14 billion that was reported, putting the country’s foreign exchange market under further pressure.
Bloomberg reported that Citigroup’s Head of Markets for Sub-Saharan Africa, George Asante, said countries with significant forex adjustments were clear winners from an investment perspective.
According to him, countries where the bank has seen significant forex adjustments offer opportunities for good investments from a local market perspective.
Asante said the removal of petrol subsidy was a very important reform for Nigeria, while moves to merge multiple exchange rates will also help to boost liquidity.
He explained that the next task for the government is to make sure the official forex market can function smoothly in the wake of the changes.
“I believe that this will be a significant catalyst for flows back into the Nigerian market,’’ Asante said, during an interview in Nairobi.
A Bureaux De Change (BDC) trader based in Marina, central Lagos, Garuba Sarki, linked market crisis to inadequate or zero dollar supply and uptick of demand from multiple buyers.
He said funding for BDCs or getting the banks to sale dollars to retail end buyers will bring greater mileage to the naira.
”The banks are not selling dollars and the BDCs have been incapacitated. Where do you expect dollar liquidity to come from? We expect the CBN to take immediate action and reverse the current trend to bring sanity to the market,” he said.
Sarki said many companies, sourcing dollars to import goods for Christmas sales and those going on summer holidays have also put more pressure on the forex market.
Former Registrar, Chartered Institute of Bankers of Nigeria (CIBN), Dr. Uju Ogubunka, called on economy managers to tackle the naira-dollar relationship headlong and entrench exchange rate stability, while boosting foreign reserves.
He advised the Acting Central Bank of Nigeria (CBN) Governor, Folashodun Shonubi to tackle the volatility in the forex market.
“It is not difficult to find what he should. Naira-dollar relationship is at its worst state, at least let’s get to where we were before and from there, move further forward. He needs to create jobs, and reserves which relates to the exchange rate should be boosted. H also needs to improve export and reduce import,” Ogubunka advised.
Also speaking, President, Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, advised the Federal Government to enhance financial intelligence by tracking people with proceeds of corruption to sanitize the market.
He said many of the people with proceeds from corruption are the ones putting pressure on the forex market through their manipulative actions.
“The naira is depreciating not by forces of demand and supply, but by the collective action and impact of the people with illicit funds,” he said.
The CBN had in June commenced currency reforms that brought about exchange rate unification and abolishment of multiple multiple exchange rates.
The exercise led to 40 per cent drop in naira rate at the official market, but dollar supply has continued to be a big challenge making it difficult for official and parallel market rates to converge.
