Each of Nigeria’s twenty banks will receive an allocation of one million dollars weekly from Monday for sale to their customers to cover medicals, school fees, personal and business travel, BusinessDay has authoritatively learnt. The relief was agreed at Friday’s bankers committee meeting.
The allocation will also cover some other invisibles and should get to customers at around N375 a dollar BusinessDay has learnt.
One banking source who spoke with our reporter raised the hope that the weekly allocation will positively impacts rates which have gone higher than N500 a dollar in the last week.
It is expected that bankers will provide regular records of sale to the apex bank and it is the expectation that with BVN, fraud will be minimized.
Earlier Friday, Renaissance Capital hinted in a note that Nigeria may lose its grip on the naira.
Foreign portfolio inflows slumped 70 percent to a nine-year low last year, as investors shelve naira assets on foreign exchange risks. But following its consulations with policy makers in Abuja, Rencap said a foreign exchange policy adjustment is in the works as more foreign portfolio investors shun naira assets.
If this materialises, it would come as a relief to foreign investors whose funds are trapped in the country due to acute dollar shortages resulting from Nigeria’s management of its FX market and it may set the tone for new inflows into dollar-strapped leading economy in Africa.
“Our key takeaways (from the consultations) were: FX policy may be adjusted in the short term; inflation is likely to slow; any interest rate hikes will be moderate; the economy will grow by less than 1% in 2017; and capital expenditure will pick up, but higher fuel prices imply an increase in the subsidy and upside risk to the budget deficit,” the note penned by Yvonne Mhango, Rencap’s sub-Saharan Africa economist, read.
“We think the most probable outcome of an FX policy adjustment is a managed float, possibly a new peg, but a full float is unlikely,” added Mhango, who sees an exchange rate of NGN447/$1 by year-end.
Despite a devaluation last June, which saw the naira shed almost 40 percent, traders say the naira is still overvalued and have criticised the CBN’s aggressive intervention in the market to defend the naira even when it doesn’t have the firepower.
Manji Cheto, a policy risk analyst and senior vice president at global advisory firm, Teneo Intelligence contends that Nigeria needs a full-float as another rate peg may turn out counter-productive and remain unattractive to foreign portfolio investors.
“I do not think devaluation is the right strategy anymore, Nigeria needs a flexible exchange rate where there is a market-determined naira dollar exchange rate in order to boost autonomous capital inflow, with CBN intervention only at highly volatile times,” Cheto told BusinessDay.
The naira opened at N309.76/1$ at the official market on Friday morning, according to Bloomberg data, while it exchanged for a premium of N510/$1 at the parallel market, where traders say the naira is closer to its true value against the greenback.
Authorities are also talking of replacing the de facto ban on 41 items with import tariffs, according to Rencap.