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Nigeria’s cheap naira attracts foreign investors

More than two months after Nigeria allowed its currency to devalue, the country is starting to reap some dividends, Elombah.com has learnt.

According to a report in the Independent Online, Exotix Partners and Standard Bank Group have in the past two weeks told clients, most of whom fled after the country started imposing capital controls from late 2014, that they should start buying naira assets again.

The worst-performing currency this year among more than 150 globally has depreciated 37 percent against the dollar since the central bank abandoned its peg on June 20, while bond yields have jumped to more than 20 percent. The naira strengthened 4.6 percent to 315 (R13) per dollar on Tuesday after falling to a record 350.25 on Friday.

“The ch7eap naira is attracting foreign investors,” said Lutz Roehmeyer, a money manager at Landesbank Berlin Investment, which oversees about $12 billion (R162.8bn) of assets.

“At 325 per dollar, the naira is too weak and Landesbank anticipated a rebound,” he said.

Roehmeyer’s funds had doubled their holdings of naira debt, albeit in the form of bonds issued by the World Bank’s International Finance Corporation rather than the Nigerian government, to the equivalent of around $9.2 million this month, he said.

Nigeria’s central bank governor Godwin Emefiele fixed the currency in February 2015 at 197 to 199 per dollar to stop it plunging amid the decline in the price of oil, on which Nigeria depends for 90 percent of exports and the bulk of government revenue.

He relented after 16 months as the country stumbled toward a recession and foreign reserves fell to their lowest level in 11 years.

“The exchange rate is closer to fair value in the eyes of most investors” said Andrew Howell, a New York-based frontier-markets analyst at Citigroup, the world’s biggest foreign exchange trader. “But there still aren’t many inflows.”

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