Daily turnover on Nigeria’s new foreign exchange window for investors has reached eighty million dollars and the vast improvement is now encouraging players to bet on the convergence of rates that should bring in more investment in stocks and bonds.
According to Bola Onadele, CEO of Lagos based FMDQ OTC Securities Exchange, the high of $80m daily turn over was achieved last week and it is expected to rise even further.
The central bank and Lagos-based FMDQ OTC are taking a “phased approach toward a single foreign-exchange market,” according to Bola Onadele.
The central bank is participating in less than 20 percent of trades and its share may drop further as dollar liquidity increases, Onadele said.
While several global bond funds continue to watch Nigeria, saying the many exchange rates make its currency regime too risky, some including Cape Town-based Allan Gray Ltd. have increased their holdings.
The Nafex market has been popular enough to get its own set of non-deliverable forwards, which are traded offshore as a way for investors to hedge their positions or take bets on the currency.
Although unorthodox, the central bank’s approach is helping to solve Nigeria’s dollar shortages, Onadele said.
“There is opportunity for convergence and there is no better time for it,” Onadele, also know as Koko, said in an emailed response to Bloomberg questions Thursday.
“It must be on every participant’s radar. However, the multiplicity of rates will be dealt with probably over a period,” he said, without giving details of the timing.
The central bank introduced the so-called Nafex window for investors, which is overseen by FMDQ and in which the naira has been allowed to drop to its black-market rate, on April 24. The currency was quoted at 371.41 per dollar in the Nafex market on Thursday, while trading at 370 on the street.