There were indications yesterday that not a few foreign interests seek further devaluation of the naira to as low as 300 to the United States dollar, if desired economic goals must be achieved.
The new foreign exchange regime implemented by the Central Bank of Nigeria, CBN, saw the naira devalued from 197 to about 283 against the dollar on the official side, losing over 30 percent of its value since the start of the new regime.
But according to respected news media, Bloomberg, many foreign investors remain unconvinced, and they are seeking more devaluation of the local currency.
Prior to the start of the new flexible foreign exchange regime, investors tacitly asked that the CBN devalues the naira to reflect market realities.
Relating its findings across global financial capitals, Bloomberg stated that Renaissance Capital, RenCap, a Russian investment banking firm with a base in Victoria Island, Lagos, said in January that the fair value of the naira was 305 against the dollar, urging the CBN to devalue the currency to 250 at the time.
But with its 16-month-old peg on the naira gone courtesy of the new regime, the naira depreciated below RenCap’s requested 250.
But other investors want more depreciation.
For instance, the report said Christine Phillpotts, a stocks analyst at AllianceBernstein, says the fair value of the naira is 320/$1, arguing that, “It’s hard to tell what the central bank has in mind, it’s probably driven equally by economics and politics,” she said, adding that, “It comes down to Buhari and his comfort level with the new regime.”
Alliance Bernstein LP and Loomis Sayles & Co., which are currently among investors navigating post-Brexit global market turmoil, say CBN is not letting the naira weaken enough.
The foregoing positions tally with that of Rick Harrell, an analyst in Boston for Loomis Sayles, which oversees $229 billion of assets who told Bloomberg that “the Central Bank is probably wondering why investors haven’t moved back in following the devaluation.”
He said investors were “being cautious and the main reason why is the state of the economy. The fundamental backdrop isn’t positive.”
Bloomberg stated that trading in the Nigerian interbank foreign exchange market was yet to pick up, partly because the CBN cleared a backlog of dollar demand by selling more than $4 billion in the spot and forward markets on the first day without the peg.
“That the currency’s been so stable since the devaluation tells me that the central bank is still heavily managing it,” Harrell said.
“If we saw gradual depreciation to 300 or above, investors might feel more comfortable coming back,” he added.
Plot to exploit cheap labour
According experts spoken to, the intention of the foreign interests is to bring down the naira-dollar exchange rate further to enable them exploit the Nigerian labour market to their respective advantage.
Said Ikechukwu Ofili, an Abuja based financial consultant: “It’s all a selfish game they are playing. They know we have over 50million unemployed youths in this country. Their game plan is to see the naira further devalued; then with a briefcase of a few dollars or some other foreign currencies, they enter into Nigeria and employ Nigerians cheaply. For instance, if they offer you as a graduate a job for about N150,000 per month, you will think it is big money. But get to the market, you will not get the exact worth of your expectation. And don’t forget that the N150,000 equates to little or zero investment on their part if the naira falls to N300 per dollar.”
The Economic Advisor in an African mission also in Abuja told Nigerian Pilot that: “It is a conspiracy by foreign economic blocs to use Nigeria’s abundant labour cheaply at their whims and caprices. And when they are through, they dump the workers and they are back the unemployment or unemployable market.”
He added that the development sums up the disdain with which interests treat other countries like Nigeria.
He cited the statement by CBN governor, Godwin Emefiele, that despite floating the Nigerian currency, the CBN would intervene in the market from time to time to ensure proper regulation, as he assured that the naira would settle at 250/$, adding that “these people are desperate; your CBN governor could be helpless at the end of the day since desperate people do desperate things to reach expected ends. They can go to any length.”