Analysts expect Nigeria to float naira

NIGERIA, whose currency the naira lost almost 8 percent against the dollar this year, stands to benefit from letting market forces have more say over its exchange rate, according to Ecobank Transnational chief executive Albert Essien.

“I would move to a regime of managed floating of the currency,” the head of the largest pan-African lender said on Friday. “I don’t see how they can manage to intervene the way they are doing. I need to know how they could continue to hold on.”

Nigeria’s central bank on Thursday vowed to fight off speculators taking bets it would devalue the naira after Kazakhstan became the latest country to abandon control of its currency this week.

The naira could be the next currency to go, analysts including Bernd Berg of Société Générale have said.

The currency was 20 percent overvalued, Renaissance Capital economist Yvonne Mhango said last week.

Essien said the central bank would still have to intervene to stabilise the naira even if it did ease restrictions. The regulator might establish a target band for the currency in that scenario, he said.

“Perhaps it may not be advisable to leave it totally to the markets without some guidance in the short to mid term,” Essien said.

“When all these challenges – in China and not knowing what the US would do – abate then perhaps you could take a chance of floating fully.”

The central bank imposed trading restrictions in February to prevent dollars from fleeing the economy.

It bolstered rules after a strategy of burning through foreign reserves, down 8 percent this year, failed to stop the naira sliding to a record low on February 12. – Bloomberg