Web of alternative exchange rates conceals naira’s real value
Rally spurred by central bank decision to sell dollar forwards
Don’t be fooled by the biggest black-market gain in a year for Nigeria’s naira.
The rally, sparked by increased sales of foreign-exchange forwards and looser capital controls, is contingent on the central bank continuing to sell down its reserves. And until it devalues or makes a clear switch to a free-floating currency, Africa’s most-populous country will struggle to lure back foreign investors, according to JPMorgan Chase & Co. and Renaissance Capital.
Forwards suggest more declines to come, investors are shunning naira assets, and a web of alternative exchange rates only adds to the confusion over the currency’s real value. Here’s a snapshot of Nigeria’s markets in five charts: