Nigeria’s Emefiele Said to Have Met Bond Investors in U.S., U.K

LAGOS, Nigeria, Capital Markets in Africa: Nigeria’s central bank Governor Godwin Emefiele and Deputy Governor Sarah Alade travelled to the U.S. and U.K. this week to try and entice bond investors to buy assets in Africa’s largest economy, according to two people with knowledge of the talks.

Emefiele and Alade met investors in Los Angeles, Boston, New York and London, according to the people, who asked not to be identified as the discussions were private.

Several investors in London told the governor there wasn’t enough liquidity in Nigeria’s foreign-exchange market for them to be comfortable buying naira bonds, the people said. He denied their claims that the central bank continued to control the currency’s exchange rate even after its 30 percent devaluation against the dollar on June 20, they said.

Investors fled Nigeria as the economy, which relies on oil for 90 percent of export earnings, slowed following the crash in crude prices in mid-2014 and as the central bank imposed capital controls and a currency peg of 197-199 naira per dollar from March 2015. While the currency has fallen to around 282 since the 16-month peg ended, few investors have returned to the local markets and the black market rate is still around 20 percent weaker at 360.

Isaac Okorafor, a spokesman at the central bank in Abuja, the capital, didn’t answer calls to his mobile or immediately respond to text messages requesting comment.

Emefiele expressed surprise that investors regarded the black market as a gauge as it was too small to be a true measure of the naira’s value, the people said. Investors also told him they were concerned that the central bank had lower reserves than its stated figure of $26.4 billion because it may have sold some of the currency on the forwards market.

Devaluation Delay
Emefiele said the currency peg was maintained for so long partly because it took time to convince President Muhammadu Buhari that it was in Nigeria’s interests, one of the people said. The governor’s predecessor, Muhammadu Sanusi II, who is now the Emir of Kano, Nigeria’s second highest-ranking Muslim figure, urged the central bank to let the naira trade more freely in a speech in Lagos on Thursday, ThisDay newspaper reported.

The governor also told the investors that the central bank had acted decisively with Skye Bank Plc, the country’s eighth-largest lender by assets, whose management was replaced on July 4 for failing to meet liquidity thresholds. Emefiele said the central bank wouldn’t allow any depositor to lose money, according to the people.

Skye Bank’s shares have since continued to fall, as investors fret about the health of other lenders. They dropped 8.2 percent to another record low of 56 kobo by 1:06 p.m. in Lagos, extending their losses this year to 65 percent.

Source: Bloomberg Business News