FACTBOX-Recent capital controls in emerging markets

                                
 May 20 (Reuters) - The global financial crisis has pressured
emerging currencies and prompted several to introduce capital
controls -- although a recent global market recovery has taken
the strain off and is seen lessening the urgency.
                                
 Below is an overview of capital controls introduced by
Iceland, Ukraine and Nigeria in 2008 and 2009.  
                                
 For a factbox on proposed, possible and pre-existing capital
controls in the key European, Middle Eastern and African
emerging economies including Russia, Kazakhstan, Turkey and
South Africa in, click here [ID:nLK973049]
                                
 ICELAND
                                
 -- Iceland's highly indebted banking sector collapsed in
October, taking with it the wider economy and the crown currency
<EURISK=D3>.
                                
 -- Iceland attempted to introduce a currency peg -- which
survived less than a day -- before imposing stringent capital
controls restricting foreign exchange purchases to those for
essential items such as food, fuel and medicine.
                                
 -- The toughest controls were later relaxed, with new rules
set out in November 2008.  The central bank said in May that
circumstances did not yet allow for the dismantling of capital
controls, though progress had been made towards allowing the
gradual and systematic easing of controls in the future.
                                
 -- A gulf remains between the value of the Icelandic crown
in the effectively state-controlled local market <EURISK=> of
around 174/euro and the barely traded offshore market
<EURISK=D3> which values it at closer to 205/euro.
                                
 -- Moving capital out of the country in connection with the
sale of foreign investments is prohibited. Investing in
securities, investment funds and money market instruments
denominated in foreign currency is prohibited. However, those
who held such investments before the rules were introduced are
allowed to reinvest.
                                
 -- All foreign currency acquired by domestic parties must be
submitted to a domestic financial undertaking within two weeks.
                                
 -- Borrowing and lending between domestic and foreign
parties other than transactions with goods and services may not
exceed 10 million Icelandic crowns per calendar year. The loan
period must be for at least one year.
                                
 -- Movement of capital for gifts, subsidies or other
purposes in amounts exceeding 10 million crowns per calendar
year is also prohibited.
                                
 UKRAINE 
                                
 -- The hryvnia currency <UAH=> nosedived late last year as
steel exports earning Ukraine dollars collapsed. The central
bank has been controlling the currency through regular
intervention and auctions since December. Some banks and dealers
initially criticised the auctions as lacking transparency and
interventions that did not meet full demand. 
                                
 -- Since the start of the year, the central bank has limited
its intervention sales on the interbank market to banks that
have had to settle debts by a particular date and has also
introduced special auctions for banks needing to sell dollars to
individual clients and small/medium sized businesses needing to
settle debts as a way of calming down the cash market. 
                                
 -- In April, the central bank tightened the rules for
selling dollars on the interbank market, a factor behind Moody's
downgrade of Ukraine's sovereign debt rating. [ID:nLC99883]. The
central bank said it would sell dollars only to those banks
which had to pay back debts taken out and subsequently converted
into hryvnias. The retroactive rule may mean banks have a harder
time receiving dollars to pay back debt, while it is also meant
to encourage lending in hryvnia. 
                                
 -- Banks that buy dollars from the central bank but then do
not use them must sell them back to the central bank within five
days at the rate they paid. 
                                
 -- Parliament has voted in a first reading for a law that
would force all exporters to convert their foreign currency
earnings back into hryvnias. The law needs to be passed in a
second reading to come into force. 
                                
 -- Commercial banks are under continuous political pressure
from the central bank, Prime Minister Yulia Tymoshenko and
President Viktor Yushchenko who have all reprimanded them
several times over foreign exchange sales. 
                                
 -- The IMF said in November the official hryvnia rate and
market rates should be no more than 2 percent apart. The central
bank adhered to that condition of a $16.4 billion loan programme
only earlier this month.
                                
 NIGERIA
                                
 -- Sub-Saharan Africa's second biggest economy reimposed
currency regulations on Feb 10 which prevent foreign exchange
dealing between banks in a bid to flush out speculators and
stabilise the naira <NGN=>, down 20 percent against the U.S.
dollar in two months on falling oil prices.
                                
 -- Central Bank Governor Chukwuma Soludo has said that the
measures, which have shut down the country's interbank foreign
exchange market, are only temporary and has repeatedly
emphasised that the central bank will strive to meet all
legitimate demand for dollars, including from foreign investors
exiting the country.
                                
 -- In reality, this has left the black market as the only
source for dollars for many, and the naira has appeared to
depreciate on that black market.
                                
 -- Critics say the regulations are reminiscent of those
under military rule in the mid-1990s and are a setback for
liberal economic reforms. Soludo says his flexible exchange rate
regime in the world's eighth biggest oil exporter has acted as a
shock absorber for falling world energy prices, and saved
Nigeria from the ruinous boom and bust cycles triggered by oil
shocks in the 1970s and 1980s when the exchange rate was fixed.
                                
 -- Nigeria also "froze" downward trades on its stock market
for several days in June in an apparent bid to stem sharp falls.
No price falls were recorded despite high trading volumes,
unnerving foreign investors and raising concern that its capital
markets were insufficiently regulated. The freeze was later
lifted and the stock exchange went on to record its worst-ever
year, falling by more than 45 percent over 2008 as a whole.
                                
 -- Nigeria's central bank introduced maximum deposit and
lending rates of 15 and 22 percent in March in a bid to stop the
country's banks from scrambling for additional liquidity by
entering into fierce competition to attract depositors, which
resulted in high interest rate volatility.
                                
 (Reporting by Reuters bureaus, writing by Peter Apps,
editing by Victoria Main)