Investors want naira devalued as foreign reserves hit 7-month high

Despite a record rise in Nigeria’s foreign reserves, which should ordinarily strengthen the naira, investors are asking the Central Bank of Nigeria (CBN) to further devalue the local currency.

The investors insist that the naira, which is trading at 305/$ at the official market and 490/$ at the parallel market, is not adequately priced.

The local currency saw a decline in six-month contracts to its lowest level since September, as crude oil prices rise by over 20 percent after the Organisation of Petroleum Exporting Countries (OPEC) agreed to an output cut.

The nation also saw it foreign reserves rise to its highest point since June 2016, at $26.29 billion.

Despite the positive strides, the Standard Chartered Plc and London-based Duet Asset Management say the nation needs to devalue the naira and loosen capital controls.

Ayodele Salami, who oversees around $450 million of African stocks as chief investment officer at Duet, told Bloomberg that “oil’s rise isn’t enough to eliminate the need for a change”.

Nigeria won’t attract inflows until it weakens its currency, he added.

Samir Gadio, the London-based head of Africa strategy at Standard Chartered, which forecasts the official exchange rate will be steady for at least the first half of 2017, also said Nigeria will eventually take the step.

“Eventually, they’ll have to revert to a more flexible currency regime. But for the time being, there’s no indication from policy makers that this will happen,” he said.

Tunde Bakare, serving overseer of the Latter Rain Assembly, called on the CBN on Sunday to discard the current exchange rate regime, which he regarded as confusing.