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Central Bank to Unveil New Naira Policy This Week

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The Central Bank of Nigeria is close to unveiling a new foreign-exchange policy and an announcement could come as soon as this week, according to a person who

attended a meeting between Governor Godwin Emefiele and bankers.

Elombah.com learnt the Bank may introduce a dual exchange-rate system and weaken the naira when it unveils the new policy.

The regulator will probably move to a dual exchange-rate system and make an announcement in a circular to banks, said the person, who asked not to be identified as the talks were private.

While the central bank is still working out details, it is considering a trading band around a new, weaker interbank rate, said the person, who attended the meeting on June 9 in the capital, Abuja. It may also reinstate a minimum holding period for foreign investors buying naira bonds, they said.

Bloomberg reports that the regulator will probably make an announcement in a circular to banks, quoting the person, who asked not to be identified discussing the private talks held June 9 in Abuja, the capital.

Emefiele has faced calls for more than a year to devalue the currency, as other oil exporters from Russia to Kazakhstan and Angola have done amid a rout in crude prices since mid-2014 to around $50 a barrel. Investment into Nigeria has shriveled as foreigners are put off by capital controls needed to defend the peg, while local businesses have struggled to import raw materials and equipment.

Naira three-month forwards rose to a record 302 against the dollar by 11:32 a.m. in London, suggesting traders see the currency falling to about that level from the spot price of 198.5. Forward contracts maturing in a year traded at 342.5, also a record high.

 

Analysts including those at Renaissance Capital Ltd. have said they expect the central bank to allow the naira to weaken around a trading band in the interbank market, while allocating dollars at a fixed rate to industries the government deems strategic. The central bank is still working out details of the system, the person said, and may also reinstate a minimum holding period for foreign investors buying naira bonds.

Emefiele has faced calls for more than a year to devalue the currency, as other oil exporters from Russia to Kazakhstan and Angola have done, amid a rout in crude prices since mid-2014 to around $50 a barrel. Investment into Nigeria has shriveled as foreigners are put off by capital controls needed to defend the peg, while local businesses have struggled to import raw materials and equipment.

Isaac Okorafor, an Abuja-based spokesman for the central bank, didn’t answer calls to his mobile and didn’t immediately reply to a text message requesting comment.

 

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