Experts skeptical about CBN’s liquidity pledge

EXPERTS have decried the insistence of the Central Bank Governor, Godwin Emefiele that liquidity has improved since it floated the naira to trade freely in the interbank market in June.

According to investors including Aberdeen Asset Management Plc and Duet Asset Management Ltd, the floating is anything but free with the CBN holding the naira in a tight range around N315 per dollar since the beginning of August.

“The market clearly sees that the situation with the exchange rate is getting more and more unsustainable,” said Kevin Daly, a money manager at Aberdeen Asset Management, which oversees about $9 billion of emerging-market debt. “The central bank’s still micro-managing it. We’d have more appetite if it was at 370.”

According to the central bank, the BDC and black-market rates, which barely differ, aren’t a true reflection of the naira’s value and only account for about 5 percent of foreign-exchange transactions in the country. Even though foreign investors, for compliance reasons, typically have to use the interbank market if they bring dollars into Nigeria, they still watch the black market closely. For the latest rates, they monitor websites such as, which collates prices from traders in Lagos each day, and

“However small the volumes, it’s a rate that’s out there and it gives you an idea of the pressures on the naira,” Ayodele Salami, who manages about $450 million of African equities as chief investment officer at Duet Asset Management Ltd. in London, said by phone Oct. 5.

“It undermines confidence in the interbank market. You can’t have a gap like this. It should never be more than five or 10 naira.”

Such is the dysfunction in Nigeria’s foreign-exchange market that analysts’ views on the naira vary widely. Those at London-based Exotix Partners LLP said in a Sept. 26 note that the currency was already undervalued at 315, while Win Thin, global head of emerging markets at Brown Brothers Harriman & Co. in New York, said two days later that the naira could fall all the way to its black market rate.

“We believe black-market parallel exchange rates are a good guideline for where a freed-up currency could initially move,” he said. “Despite the introduction in June of what was touted as a new ‘floating’ FX regime, the Nigerian naira remains tightly controlled.”

According to a BDC operator, Ibrahim Jaji, where there is scarcity of any product, there will be a black market for it. “Our foreign-exchange receipts aren’t what they were in the past. It’s the reality we’re facing.”