Nigerian officials said they are still working out the details of a new currency policy and may make an announcement within the next month, according to bond investors who met with a delegation led by Finance Minister Kemi Adeosun in London on Tuesday.
When asked how long before a more flexible foreign-exchange regime was unveiled, investors were told it would probably be “days or weeks,” said Kevin Daly, a money manager at Aberdeen Asset Management Plc, who attended the talks. Aberdeen has sold all its Nigerian government debt in response to the introduction of capital controls. Nigerian authorities said they’re “having discussions, including with local banks,” Daly said by phone from London.
Festus Akanbi, a spokesman at the Finance Ministry, said by phone he couldn’t comment as he hadn’t been briefed by Adeosun since she returned to Abuja, the capital, early Wednesday.
Central bank Governor Godwin Emefiele has pegged the naira at 197-199 per dollar since March 2015, even as other oil producers from Angola to Kazakhstan have let their currencies drop amid a rout in crude prices since mid-2014. The capital controls imposed by Emefiele, with President Muhammadu Buhari’s backing, have sent the black-market rate plunging to 361 per dollar and caused foreign investors to flee.
Emefiele said on May 24 after the last Monetary Policy Committee meeting that a new foreign-exchange system would be announced “in the coming days.”
The central bank was represented at the London meetings by Alvan Ikoku, its director for trade and exchange.
“The director confirmed that in line with the recent MPC statement, it was discussing how to implement a more flexible foreign-exchange regime,” said Richard Segal, an emerging market analyst at Manulife Asset Management. “The central bank said there would be some kind of announcement relatively soon.”
Adeosun also said that Nigeria may issue a $1 billion Eurobond in the third quarter and that it was close to securing $3 billion of funding from the World Bank and African Development Bank, according to Daly. The finance minister said the government was committed to a budget deficit of no more than 2.2 trillion naira ($11.1 billion), or 2.1 percent of gross domestic product, this year even as the economy teeters on the verge of a recession, Daly said.
Nigeria has sold dollar bonds twice, the last time in mid-2013, when it raised $1 billion of five- and 10-year debt. The government has said it will fund the fiscal gap with about $10 billion of debt, half of it in foreign currencies.
Yields on Nigeria’s $500 million of securities maturing in July 2023 fell five basis points to 7.44 percent in London by 10:22 a.m. and have dropped 1.2 percentage points this year. Nigeria’s Eurobonds have gained 8.5 percent in 2016, compared with the average of 10.4 percent for high-yielding emerging-market sovereign dollar-debt tracked by Bloomberg. Three-month naira forwards dropped 0.2% to 274.5 per dollar, suggesting traders see the currency trading near that level in coming months.
Adeosun said Nigeria would probably post budget deficits for at least three years and that its debt-to-GDP ratio would rise to 20 percent from around 13 percent in that period, according to Gregory Kronsten, an analyst at Lagos-based FBN Quest who was at the meetings.