Nigerian officials are progressively self assured that the naira’s problems are over for good. Some investors, however, have different opinion.
As stated by Bloomberg, portfolio inflows have move upward in the past three months with crude prices increasing above $60 a barrel and money managers taking heart from a new foreign-exchange trading window, in which the naira has meet with the black-market rate.
That trigger Central Bank of Nigeria Governor, Godwin Emefiele, and the Director-General of the Debt Management Office, Patience Oniha, to inform investors in London on October 27 that the currency was set to become stronger.
Kemi Adeosun the Minister of Finance agreed, sayin on November 2 that the Federal Government saw no notable exchange-rate risk as it prepared to increase $5.5 billion of Eurobonds.
Specialists, however, said that Nigeria’s structure of capital controls, multiple exchange rates and the trading window known as Nafex would fight to get through a drop in oil revenue or sentiment turning against emerging markets.
The Sentiment is expected to come as the United States Federal Reserve increases interest rates, according to investors including Ashmore Group Plc and Standard Life Aberdeen Plc.
“Right now, it’s easy for them to run the current structure and muddle through,” the Managing Director of TCW Group in Los Angeles, which oversees $200 billion and not long ago started buying naira debt again after withdrawing during the 2014 oil crash, Brett Rowley, said.
Foreign holdings of Nigerian government debt may have more than double from around five percent a year ago, as stated by Standard Chartered Plc.
That has helped the naira to grow by two per cent since August to 360.25 per dollar, reducing its loss in 2017 to 12 per cent.
At the moment, Nigeria’s gaining from a bullish oil market and uncontrolled request for developing-nation benefits. Crude prices have increased 39 per cent since June as OPEC members including Saudi Arabia push for output cuts to proceed in 2018.
And production in Nigeria, which is free from the restraint, has increase 15 per cent this year to 1.7 million barrels a day as militants halt bombing export terminals and pipelines.
Foreign reserves stood $34 billion on October 30, the highest in nearly three years.
But a decrease in Brent crude to around $50 a barrel would likely be sufficient to push Nigeria’s current account back into deficit, according to Bank of America, which sees the naira dropping to 432 per dollar by the end of 2018