The Lagos market lost $6.5 billion on Tuesday, or 16 percent of its market value, after banks started quoting the naira using a trading window for foreign investors rather than the interbank rate. That wiped out the gains made in the past two months during a rally spurred by investor optimism on the so-called Nafex system.
Nigeria took a step to unify its multiple exchange rates by allowing banks to use a currency window for investors when quoting the naira rather than the official rate. The naira weakened on the interbank market.
Nigeria missed its best chance in 13 months to overtake Egypt in stock-market capitalization as an expansion of the new foreign-exchange window spurred a plunge in the naira.
Unlike Nigeria, whose measures have fallen short of a full currency float, Egypt is gaining from its decision in November to let the pound’s value be determined by the market. While that initially shaved off 42 percent of the combined value of Cairo stocks, it soon brought in foreign investors, boosting the capitalization by $12 billion.
Nigeria’s main equity index rose for a third day to a one-week high Thursday.
Nigeria has faced dollar shortages since the price of oil, its main export, crashed in 2014 and the central bank responded by tightening capital controls. As the squeeze worsened, Nigeria opted for a system of multiple exchange rates rather than floating its currency like other crude producers such as Russia and Kazakhstan.