The circulars from the Central Bank of Nigeria on cryptocurrency transactions, repatriation of export proceeds and diaspora remittances may be rubbing off negatively on foreign investors, the Financial Derivatives Company Limited has said.
The CBN had said in a circular last week that it prohibited regulated institutions from dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges. It, therefore, ordered banks and other financial institutions to close all cryptocurrency accounts.
Analysts at Lagos-based FDC, led by Mr Bismarck Rewane, said in their latest economic bulletin, “It is clear that the CBN is more inclined to address the issue of price and exchange rate stability with the use of more orthodox means and controls.
“The plethora of circulars released by the CBN ranging from the repatriation of export proceeds, to diaspora remittances and more recently cryptocurrency transactions, may be rubbing off negatively on international investors who are uncertain of the policy environment in the country and what circular may be released next.”
They said foreign portfolio inflows into Nigeria had declined sharply partly because of COVID-19 “but maybe, more importantly, because of policy ambiguity”.
The analysts said, “We expect the CBN to reduce its forex rationing, especially with oil prices trading at $60 per barrel. Also, with money market interest rates trading above 10 percent for the first time in about five months, it means that liquidity in the banking system is reducing and the demand for dollars can be curtailed.
“The CBN may give in to a managed depreciation rather than a one-off devaluation, i.e. a crawling peg that would effectively allow the naira to trade within a band. The crawling peg could be based on the Nigeria-US inflation differential, currently around 14.35 percent.”
They said this would increase transparency for investors and reduce uncertainty, as well as help bring inflation under control.