Just because Russia has managed to stabilize its currency for the time being as crude tries to find a floor, that certainly does not mean the soaring dollar tantrum-cum-crude crash episode is anywhere near over, nor that stability has returned to the rest of the oil-exporting countries. Case in point, crude-exporting powerhouse Nigeria, where things are going from worse to #REF!
As Bloomberg reported yesterday, the temporary Russian FX-trading halt appears to have inspired all other nations with plunging currencies (the Nigeria Naira just hit a new record low against the dollar in recent trade), and as a result Nigerian FX dealers halted trading after a central bank rule change meant to "limit speculation" against the plunging naira confused investors. “This raises concerns about the credibility of the central bank,” Kevin Daly, senior portfolio manager at Aberdeen Asset Management Plc, said by phone from London. “If it was their intention to stabilize or see some appreciation of the naira, it’s backfired.”
Bid and ask prices for the naira were quoted from 162 to 190 per dollar with only 16 trades by 1 p.m. in Lagos [yesterday], compared with more than 170 by the same time yesterday, according to data compiled by Bloomberg. The naira fell 12 percent against the dollar this quarter, the worst among 24 African currencies tracked by Bloomberg after Malawi’s kwacha. Investors dropped Nigerian assets as the outlook for Africa’s biggest oil producer worsened with Brent crude prices almost halving since late June.
This is how you implement currency controls like a true boss: "The Abuja-based regulator met currency traders about a circular issued on its website today that cut banks’ maximum foreign-exchange net-open position to zero of shareholder funds by the end of each business day from 1 percent. Interbank naira trading ground to a halt, according to Samir Gadio, head of African strategy at Standard Chartered Plc. The central bank later updated the circular to say the change was temporary."
“Banks have to sell all dollars they buy from the market, not to keep them until the following day,” Deputy Central Bank of Nigeria Governor Sarah Alade said by phone from Abuja. “It is to ensure dollar liquidity. We have noticed some dealers speculating on the currency because of the pressure from declining oil prices.”
Deputy Central Bank of Nigeria Governor Sarah Alade said,
“Banks have to sell all dollars they buy from the market,
not to keep them until the following day.”
But the punchline surely was Nigeria's central bank's advice to the public: Don't Panic.
Lenders will still be able to buy dollars on the interbank market if they have orders from customers needing to import goods and services, Gadio said. The central bank will continue to support the naira with sales of dollars in the interbank market, Alade said.
“The banks can’t stop trading because of the circular,” the Deputy Central Bank of Nigeria Governor Sarah Alade said. “It is not supposed to close the market. We have told them we’ll continue intervening in the market, so there is no need to panic.”
Maybe there is:
To be sure, "don't panic" is the only code word investors need to hear to completely bug out:
Aberdeen Asset Management cut its naira holdings completely over the last two months and has no immediate plans to re-enter the market as the currency could fall further, Daly said.
“I’m happy to sit on the sidelines and wait to see it go higher against the dollar,” he said. “We’re getting to 200 quicker than I expected. But if someone called me right now and said they’d offer me 200” naira for each dollar, “I’d say no,” Daly said.
This was yesterday. Today the completely halt of FX trading continues: as Bloomberg commented earlier today, "the policy on retaining zero bank’s shareholders funds as FX trading position by close of business remains in effect."
* * *
And just in case there is confusion that the currency crisis is confined simply to energy exporters (as previewed here over a month ago), today the Belarus central bank shocked its own population when it also announced full-blown capital controls designed, releasing additional measures to stem the "negative trends of currency and financial markets " including raising mandatory sales of FX revenue to 0%, suspending all OTC FX trading (so pretty much all FX), introducing a 30% fee on all FX purchases, "recommending" that banks halt BYR lending until February, and sending 1-yr interest rates on liquidity operations with banks to a eyewatering 50% in hopes this leads to an increase in BYR deposit rates. It will. What it won't lead to is stabilization in the deposit market as the natives realize they too are next up on the hyperinflation train.
Full NBRB press release:
On Measures Taken by the Government and the National Bank with a View to Preventing Development of Negative Trends in the Financial Market
Having regard to the situation in the neighbouring states’ economies, primarily in the Russian Federation, the Government and the National Bank of the Republic of Belarus took a number of measures aimed at preventing the development of negative trends in the foreign exchange and financial markets of the Republic of Belarus and rising attractiveness of savings in Belarusian rubles.
The National Bank increased the interest rates on standing facilities and bilateral operations designed to support banks’ liquidity to 50% per annum. This measure, in turn, will result in the proportional increase in the rates on deposits in the national currency.
All major Belarusian banks should introduce a term guaranteed saving deposit with the mechanism of ruble savings indexation in case of the Belarusian ruble exchange rate changes. This measure will protect the savings in the national currency from the exchange rate risks and raise their attractiveness compared with the savings in foreign exchange.
Having regard to the increased demand for foreign exchange in the domestic foreign exchange market, it was resolved to introduce a temporary 30% fee for purchase of foreign exchange by legal and natural persons. Enterprises and banks will pay this fee when purchasing foreign exchange at the stock exchange; natural persons – in the form of commission when purchasing foreign exchange at banks. The paid funds will be directed to the budget.
At the same time, the approaches to setting up the exchange rate in the domestic market will remain unchanged. Any citizen may purchase and sell foreign exchange without any limitations; economic entities – at the Belarusian Currency and Stock Exchange. The operations involving purchasing/selling of foreign exchange by economic entities – residents of the Republic of Belarus in the over-the-counter foreign exchange market are temporarily suspended.
Besides, the norm of obligatory sale of foreign exchange proceeds inflowing to the country has been increased to 50% since December 19, 2014.
Along with the above-mentioned measures, the approaches to the monetary policy implementation has been tightened for the purpose of limiting money supply growth and increasing the "cost" of money.
In particular, the banks have been recommended to avoid the build-up of credit portfolio in Belarusian rubles till February 1, 2015 and not to change the currency of monetary obligations of the borrowers under credit agreements.
At the same time, it was resolved not to apply the supervisory response measures to banks for non-compliance with the requirements of Resolution of the Board of the National Bank of the Republic of Belarus No. 260 dated April 22, 2014 "On Maximum Amounts of Interest Rates on the Banks’ Operations Involving Provision of Monetary Funds (Credits) to the Legal Persons – Residents of the Republic of Belarus" from December 18, 2014 to January 1, 2015.
The above-mentioned measures will make it possible to raise the attractiveness of savings in Belarusian rubles, balance the foreign exchange market under the conditions of the increased demand for foreign exchange and avoid the growth of speculative expectations.
So as globalization goes into full reverse, and as major countries isolate themselves from global trade, clearly it's time to load up and fall back on that good ole' BTFATH mentality.