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Nigerian exchange bureau head urges rate unification

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By Oludare Mayowa

LAGOS (Reuters) – Nigeria’s central bank must step up efforts to unify the country’s multiple exchange rates to sustain gains in the local currency over the last few months, the head of the country’s exchange bureaus said.

Africa’s biggest economy has at least six exchange rates which include one for Muslim pilgrims going to Saudi Arabia, a retail rate set by licensed exchange bureaus, and a rate for foreign travel and school fees, in addition to the official and black market rates.

Nigeria is battling a currency crisis brought on by low oil prices which tipped its economy into recession and created chronic dollar shortages. It wants to attract foreign investors and strengthen its currency to ward off inflation.

The central bank has been intervening on the official market in the last few weeks to try to narrow the spread between rates on the official market and black market – where the local currency trades around 30 percent weaker. It has sold about $5 billion since February.

The bank opened a currency window in April for investors to trade the naira at rates set freely between buyers and sellers, hoping to increase the amount of dollars available in Nigeria.

“The gradual convergence of the exchange rate on both black market and investor forex window is an opportunity for the central bank to unify rate in all segments of the forex market,” Aminu Gwadabe, president of the country’s Association of Bureaux De Change Operators told Reuters late on Thursday.

Gwadabe said a move to eliminate multiple rates would restore investors’ confidence in the economy and boost offshore dollar inflows, further strengthening the naira.

Central bank spokesman Isaac Okorafor said the regulator would sustain its current efforts to improve dollar liquidity in the market until it was able to achieve currency rate convergence.

The naira was quoted at 365 to the dollar on the black market on Friday, while the local currency was quoted at 372.70 per dollar at the investor window.

The local bourse rose to a two-year high on Wednesday as investors snapped up Nigerian stocks after MSCI increased the country’s weighting in its frontier market index.

Nigeria’s forex reserves grew to around $30.22 billion by June, from $26.44 billion a year ago, as oil production and oil price stabilise in the wake of OPEC and non-OPEC oil output cut deal, analysts have said.


(Editing by Alexis Akwagyiram and Toby Chopra)


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Nigeria to sell 140 bln naira bonds on June 21 – debt office

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LAGOS (Reuters) – Nigeria plans to auction 140 billion naira ($460 million) in bonds on June 21, the Debt Management Office said on Friday.

The debt office will sell 40 billion naira of bonds due in 2021 and 50 billion naira each of bonds due in 2027 and in 2037, using a Dutch auction system.

Settlement is expected the day after the sale. The bonds are re-openings of previous issues.

The central bank on Wednesday announced plans to sell 133.24 billion naira worth of Treasury bills at an auction next week.

Nigeria, which has Africa’s biggest economy, issues sovereign bonds each month to help fund its budget deficit, support the local debt market and maintain a benchmark for companies to follow.

The West African country expects a budget deficit of 2.36 trillion naira this year as it tries to spend its way out of a recession. It expects to raise money to cover more than half the deficit from the local market.

It has a series of debt issues lined up including a $300 million diaspora bond and a 100 billion naira debut domestic sukuk this month.

($1 = 304.68 naira)


(Reporting by Oludare Mayowa; editing by Alexis Akwagyiram)


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Nigerian naira hits all-time low of 334.50 per dollar

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ABUJA (Reuters) – Nigeria naira weakened to an all-time low of 334.50 against the dollar on the interbank market on Wednesday, a day after the central bank hiked interest rates to try to lure foreign investors back into local assets, traders said.

The naira fell 5.8 percent on Wednesday from its opening rate, and $10 million was traded at the new record low.

Traders said investors were pushing the currency lower to test the limit of how far it can fall, given a spread of almost 12 percent between the official and black market naira rates.

“If we have more people trying to buy the naira then it should strengthen. I think we will keep seeing the trickles … I don’t think we will see large inflows until the fundamentals of the economy improves,” one trader said.


(Reporting by Chijioke Ohuocha; editing by John Stonestreet)

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Nigeria’s central bank raises benchmark rate to 14%

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LAGOS (Reuters) – Nigeria’s central bank raised its benchmark interest rate by a surprise 200 basis points to 14 percent on Tuesday and maintained its existing cash reserve ratios for commercial banks in a bid to stabilise the naira.

In a Reuters poll, the median forecast of 13 analysts taken July 18-21 predicted that Nigeria would raise interest rates by 100 basis points to 13 percent.


(Reporting by Ulf Laessing and Alexis Akwagyiram; Editing by Ed Cropley)

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Nigeria replaces Skye Bank bosses over capital failures

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LAGOS (Reuters) – Nigeria’s central bank has replaced the chairman and chief executive of Skye Bank after it failed to meet minimum capital ratios, its governor said on Monday.

The central bank said Skye Bank’s non-performing loan ratio has been above the regulatory limit for a while and it hadmet with Skye’s board to resolve the issue, governor Godwin Emefiele told a briefing.

Earlier, banking sources told Reuters that Skye’s chief executive Timothy Oguntayo had resigned before the central bank announcement. He was the head of Skye Bank when it bought nationalised lender Mainstreet Bank in 2014.

“The basic issue is capital adequacy and liquidity. From what we see, adequacy ratio in the bank has been weakening and we don’t want it to get to a point where depositors will be at risk,” Emefiele said.

Skye Bank is designated as one of Nigeria’s systemically important banks due to the size of total sector deposits it holds after the acquisition of Mainstreet Bank. This means it has to hold more capital.

Emefiele said the central bank had conducted a stress test and decided to replace the chairman, chief executive and all non-executive directors after they failed to recapitalise the bank.

He said Skye had been a net borrower from its rediscount window for “sometime.” The central bank also appointed Tokunbo Abiru from rival First Bank to head Skye Bank.

“(Skye) bank is not in distress and remains able to continue banking activity,” Emefiele said.

Nigeria’s central bank has powers to remove bank executives and used them during the 2008/2009 global financial crisis when it sacked nine CEOs at banks which were undercapitalised.

Last year, the regulator gave three commercial banks until June 2016 to recapitalise after they failed to hit a minimum capital adequacy rate of 10 percent.

Skye Bank has been in talks with shareholders and new investors to raise 30 billion naira ($150 million). It suspended plans for a rights issue last year due to weak market conditions.

Emefiele said the overall banking industry was sound, despite weaknesses in the economy but that none of Nigeria’s 21 commercial lenders were in distress.

Shares in Skye fell 9.5 percent.


(By Chijioke Ohuocha and Oludare Mayowa. Additional reporting by Alexis Akwagyiram; Editing by Louise Heavens and Jane Merriman)

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Nigeria’s central bank intervening in currency market: traders

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LAGOS (Reuters) – Nigeria’s central bank asked for bid-offer quotes from currency traders on Monday as it sold dollars on the interbank market to boost liquidity, traders said.

After abandoning the naira’s 16-month old exchange rate peg a week ago, the central bank sold dollars at an auction to clear a backlog of demand and keep markets active.

Currency traders said they had tightened the differential between bids and offers to 0.5 naira from one naira set when the currency was floated last week.


(Reporting by Chijioke Ohuocha; Editing by Catherine Evans)

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IMF welcomes Nigeria’s decision to end currency peg

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WASHINGTON (Reuters) – The International Monetary Fund said on Thursday it welcomed the decision by Nigeria’s central bank to abandon its currency peg and adopt a flexible exchange rate policy, saying this was important to reduce fiscal and external imbalances.

IMF spokesman Gerry Rice told a weekly news briefing the Fund wanted to see how effectively the naira exchange market functions once the new float system is put into effect next Monday.

Nigeria’s central bank governor said in a letter to President Muhammadu Buhari the bank expects the naira to settle at around 250 to the dollar after it abandons the peg of 197 to the dollar it has supported for 16 months.

“I think the announcement yesterday to revise the guidelines for the operation of the Nigerian interbank foreign exchange market is an important and welcome step,” Rice told reporters. “It will provide greater flexibility in that market, the foreign exchange market.”

Senior IMF officials, including Managing Director Christine Lagarde, have urged Nigerian officials to allow the naira to fall to absorb some of the shock to the economy from a plunge in oil prices and revenues. OPEC member Nigeria is a major oil producer. IMF officials have said that Nigeria has not requested IMF financial assistance, but has been in consultation with the Fund on dealing with budget shortfalls.

“As we have said before, a significant macroeconomic adjustment that Nigeria urgently needs to eliminate existing imbalances and support the competitiveness of the economy is best achieved through a credible package of policies involving fiscal discipline, monetary tightening, a flexible exchange rate regime and structural reform,” Rice said. “Allowing the exchange rate to better reflect market forces is an integral part of that.”


(Reporting by David Lawder; Editing by James Dalgleish)

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Nigeria to adopt flexible FX regime, details to follow

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ABUJA (Reuters) – Nigeria’s central bank is adopting a flexible foreign exchange rate regime, Governor Godwin Emefiele said on Tuesday, in a policy U-turn designed to boost exports and stave off a recession in Africa’s biggest economy.

The bank has previously kept a de facto peg of around 197 naira per dollar but that has become unsustainable due to a shortage of hard currency stemming from a slump in oil revenues.

On the parallel market, the naira has fallen to some 40 percent below the official rate.

“The MPC (Monetary Policy Committee) voted unanimously to adopt a flexible exchange rate policy to restore the automatic adjustment properties of the exchange rate,” Emefiele told reporters.

Details of the new rules would be published in a few days, he added.

He said the central bank would “retain a small window for funding critical transactions” and that “details of operations of the market would be released by the central bank at the appropriate time”.

On Monday, the government said it would use a lower rate of 285 naira per dollar for petrol imports rather than the pegged official rate of 197.


(Reporting by Camillus Eboh, Ulf Laessing and Alexis Akwaqyiram; Editing by Ed Cropley and Catherine Evans)

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U.S. to press Nigeria on foreign exchange rate flexibility

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WASHINGTON (Reuters) – The United States said on Monday it would press Nigeria in talks this week to adopt a more flexible foreign exchange rate to boost growth and investment in Africa’s largest economy.

U.S. Assistant Secretary of State for Africa, Linda Thomas-Greenfield, told an audience at the U.S. Institute of Peace that Nigeria should ensure that the value of the naira currency versus the U.S. dollar was “more realistic.”

“While most people complain about the possibility of there being a devaluation, people are already operating on a devalued currency, and the only people who are not, are people who are doing it officially,” Thomas-Greenfield said.

“Our recommendation is, and we will have discussions about it … that they should look at the exchange rate and try to make the exchange rate more realistic to what the value of the naira is to the dollar,” she added.

She spoke before talks in Washington to be launched by Secretary of State John Kerry on Wednesday and which will focus on Nigeria’s economy, security and development.

Nigeria faces its worst economic crisis in decades as the falling price of oil has slashed revenues, prompting the central bank to peg the currency and introduce curbs to protect foreign exchange reserves, which have fallen to an 11-year low.

Some members of Nigeria’s central bank monetary policy committee have said the naira should be devalued.

Thomas-Greenfield said the parallel currency market in Nigeria was “alive and well,” warning that a rigid exchange rate, capital controls and import bans could undermine President Muhammadu Buhari’s efforts to expand economic growth and fight corruption. Buhari has rejected the idea of devaluing the naira.

“Capital controls that limit access to foreign exchange rewards insiders and undermines the stated goals of Nigeria to increase domestic production because both Nigerian and expat investors alike tell us many businesses are unable to obtain the capital to purchase badly needed intermediate goods,” she said.

The naira trades some 40 percent below the official rate on the black market versus the dollar. The central bank last year pegged the exchange rate to curb speculative demand for the dollar and conserve foreign exchange reserves after it restricted access to hard currency for imports of certain items, frustrating businesses.

The International Monetary Fund called on Nigeria to lift the curbs and let the naira reflect market forces more closely, as the restrictions have significantly affected the private sector.



(Reporting by Lesley Wroughton; Editing by Tom Brown and Peter Cooney)

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Nigeria stocks hit 3-1/2-year low as funds sell on naira woes

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LAGOS (Reuters) – Nigeria’s share index tumbled 3.4 percent on Thursday and hit its lowest point in almost 3-1/2 years, spooked by the weak outlook for the currency, traders said.

The share index, which has the second-biggest weighting after Kuwait on the MSCI frontier market index, has fallen for five straight days, sliding below the psychologically important 25,000 point line not seen since September 2012.

At the market close, the index was down 3.4 percent at 24,239 points. The index has dropped 12.4 percent in the first nine days of trading this year.

Currency and stock markets in Africa’s biggest economy have been hit hard by the fall in the price of crude oil, Nigeria’s main export, which has slashed government revenues and triggered an exit of foreign investors.

“From what foreign investors are telling us, when they have confidence in the naira/dollar exchange rate they can then make investment decisions,” Oscar Onyema, CEO of the Nigerian Stock Exchange told Reuters.

The naira has dived 34 percent on the black market compared with its official level of 197 after the central bank stopped dollar sales to retail currency outlets. The move has intensified speculation that Africa’s top oil producer will have to formally devalue its currency soon.

Onyema said the bourse expected 2016 to be challenging for the market after the index shed 17.4 percent last year with losses continuing into this year, as oil prices plunged and the domestic economy faltered.

Foreign buyers, who accounted for 54 percent of trading volumes, were on the sidelines owing to the lack of clarity on Nigeria’s forex policy, highlighting naira weakness as a deterrent to a market rally in 2016, he said.

The index of Nigeria’s top 10 banks fell 4.69 percent to lead the bourse lower. Top decliners included Seplat, Oando, Guaranty Trust Bank and FBN Holdings all down more than 9 percent.

“With crude oil prices down, accretion to FX reserves is out of the question … putting investors on red alert. The central bank may not be able to meet all the demand for FX even if it were to devalue,” said Ayodeji Ebo, head of research at Afrinvest.


(Reporting by Chijioke Ohuocha and Oludare Mayowa; Editing by Hugh Lawson)

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