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Home Business News

Is the new investor window already in chaos?

Chacha Wabara by Chacha Wabara
May 9, 2017
in Business News, Currencies

FMDQ--Index where local Nigerian bonds are traded.

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Nairametrics| According to Reuters, the Central Bank of Nigeria’s newest window, the investor window, seems to already be in a state of confusion as traders and locals disagree over applicable exchange rates in the window.

While foreign investors were demanding rates above 400 naira per dollar locals were quoting rates as low as 350, necessitating the FMDQ OTC Securities Exchange to convene a traders’ meeting to discuss this wide range of quotes on the naira for investors. Unfortunately, though, the meeting did not have any favorable, ‘concrete’ outcome.

The worry for traders continues to be the illiquidity in the currency market despite the fact that the CBN has allowed rates in the window to be market-determined. The CBN, while selling dollars aggressively on the forward market, has only sold tiny volumes on the spot market, a move analysts believe the apex bank is using to narrow the currency spread with black market rates. Traders say this has contributed to illiquidity in the market. Similarly, investors are adamant that the over-the-phone trading system encourages a lack of price discovery and transparency in the market.

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While these problems and disagreements could be looked at as initial hiccups common to new initiatives, they could signal a wider problem which the CBN would have to tackle sooner rather than later. On the flip side, the CBN could use these problems as further proof of why it is reluctant to allow for a full float of the Naira.

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Tags: Black MarketCBN NigeriaFinancial ServicesForex PolicyNaira float

Comments 1

  1. Anonymous says:
    May 9, 2017 at 9:14 am

    Chacha @ it again…always negative

    Reply

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