IMF: Investors concerned about Nigeria controls, but have not given up

Worries about repatriating funds out of Nigeria following currency controls last year still dominates investor fears, the International Monetary Fund (IMF) said on Wednesday. But it added that the country was still on international investors’ radar.

Miriam Tamene, an IMF senior financial sector expert, said there is interest in Nigeria’s securities market. However, investors were being careful because fears of getting trapped still exist.

Nigeria introduced capital controls following dollar shortages triggered by a currency crisis last year. The naira hit a record of 520 to the dollar, prompting the central bank to restrict fund flows. In April the bank liberalised the market to allow investors trade the naira at market-determined rates in a bid to attract inflows into debt and stock markets.

The stock market has gained 45 percent so far this year, helped by demand for consumer goods and banking shares after the central bank lifted currency restrictions for investors. Tamene’s comments came after her team visited Nigeria’s Securities and Exchange Commission (SEC) as part of consultations on developments covering the economy. The report of the consultation will presented to IMF board in February.

“Investors are interested in Nigeria, but with difficulties they had in getting their money out recently, that confidence is not there yet,” Tamene said in a statement released by the SEC. “It has improved though, but they are still watching.” Nigeria’s currency market for investors has traded $22.37 billion since it was launched, according to market operator FMDQ OTC Securities Exchange.

On Wednesday traders said some foreign investors were booking profits from treasury bills and bidding to repatriate funds abroad, creating a liquidity squeeze on the currency market, after debt yields fell. Acting SEC Director General Abdul Zubair said several initiatives have been launched by the commission to increase investor confidence and grow the capital market.

The Fund called on Nigerian authorities to lower inflation currently at 15.91 percent as of October and increase access to local monies to grow the economy. The government plans to repay some treasury maturities this month, in a move to lower borrowing cost, which has triggered a debt sell-off by foreign investors and caused treasury bill yields to fall across the board.