Details of Nigeria's flexible currency model will be ready in a "short while", the head of United Bank for Africa (UBA) said on Thursday after chief executives of the country's lenders met with central bank officials. The central bank last month announced plans to abandon the naira's 15-month peg to the dollar which has overvalued the Nigerian currency, harmed investments and caused the economy to contract.
However, the bank has yet to clarify how the new policy would work, spooking foreign investors, long worried about getting caught in the middle of a currency devaluation. Phillips Oduoza, CEO of UBA, told reporters after the bankers committee meeting that the central bank had received lots of input from stakeholders which was being studied with a view to creating a robust flexible exchange rate model.
"We want to make sure that we come up with a model that is very robust and comprehensive that would be able to address the major exchange rate issues that we have been dealing with," he said. Africa's biggest economy, which contracted by 0.4 percent in the first quarter, faces its worst crisis for decades after the sharp fall in oil prices and last year's introduction of a currency peg that put investors to flight.
The official naira rate is fixed at around 198 to the dollar. The peg has produced a black market for the currency and brought economic growth to a standstill. The currency was quoted at 368 on the black market on Thursday. And it tumbled against the dollar in the non-deliverable forward markets on Thursday, as uncertainty continued over a potential liberalisation of the naira. Three-month non-deliverable forwards showed the naira trading at around 278 per dollar, weakening 2.2 percent on the day, and the weakest since June 3.