* Individuals now getting fewer dollars for their naira
* Investors say Nigeria needs clearer, bold devaluation
* Traders say new rules hard to understand
* President Buhari is in London on medical leave (Adds bureaux de change concerns)
By Chijioke Ohuocha and Karin Strohecker
LAGOS/LONDON, Feb 22 (Reuters) - Nigeria's latest efforts to tweak its exchange rate policy have baffled investors who say the moves fall short of the currency devaluation they had hoped for and will not lure money back into the economy.
The central bank this week effectively devalued the naira for private individuals by offering them dollars at a rate of 366 naira, instead of the official 305 rate which it has held since last summer at the behest of President Muhammadu Buhari.
On Tuesday it sold dollars at forward exchange rates up to 15 percent weaker than the official rate. The move may cement expectations for the central bank to allow the naira to trade at a weaker level in the future. Yet on Wednesday, the bank intervened on currency markets at 304.5 per dollar.
Investors said it was just another bungled attempt by authorities to avoid a much-needed bold devaluation. Without that, they say, Africa's biggest economy will fail to recover from recession and an investment drought.
Cobus de Hart, senior economist at NKC African Economics in Johannesburg, said the central bank had been in two minds on how to behave for a couple of years.
"This is one of the key issues - the central bank's policies are not clear and they continue to confuse both investors and the local population," de Hart said.
President Buhari, an opponent of devaluation, has been on medical leave in Britain for over a month. Vice President Yemi Osinbajo, now acting president, helped usher in last June's 30 percent devaluation - also while Buhari was on medical leave.
"We don't know who is calling the shots on this ... The vice president seems a lot more liberal on this, which is good, but we are still uncertain where the actual orders are coming from and how independent the central bank is," de Hart added.
Under the latest rules, Nigerians wanting dollars for travel or to pay foreign school fees could buy at nearly 20 percent above the official rate, effectively devaluing the naira for private individuals. Priority allocation no longer goes to manufacturers.
The black market rate firmed to 505 to the dollar from 515 on Wednesday following central bank intervention.
Currency traders in Lagos say they were struggling to understand the new rules, especially when showing quotes to foreign investors looking to buy Nigerian bonds.
"I don't have flexibility on the rates any more because various markets on the interbank have different rates ... This is not the devaluation we have been waiting for," one Lagos-based trader told Reuters.
"Though liquidity is improving ... I don't think we have overcome the liquidity challenge completely."
Another worried group is Nigeria's bureau de change operators, unhappy with banks profiting by being afforded a wider spread than the traders are allowed.
The bureau de change association is concerned about "different applicable exchange rates to be used by both the banks and the bureaux de change on the same products at the same market," said Aminu Gwadabe, the group's president, in a message to members on Wednesday.
Foreign currency traders can buy at 381 naira to the dollar and sell at 399 naira to the dollar, while banks can now buy a dollar for 315 naira and sell for 375 naira, giving them a much larger profit margin of 60 naira, Gwadabe said.
"This is unskewed and will lead to an unhealthy competition and is detrimental to the existence of over 3,000 licenced bureaux de change nationwide," he said, adding that the association had submitted its concerns to the central bank.
Multiple exchange rates have been used by other developing economies experiencing economic difficulties, often to assuage hard currency shortages in key sectors. Venezuela moved from a three-tiered to a dual exchange rate system last year.
Many say Nigeria should bite the bullet and follow the examples of Egypt and Russia by opting for a total free float and bearing short-term pain for long-term gain. Both countries saw their currencies plunge after the float but later enjoyed a recovery in exchange rates and investments.
Nigeria's decision to freeze the naira has already caused a lot of woes. JPMorgan announced in 2015 it would cut Abuja's debt from its influential bond index. Factories had to shut down, unable to import raw materials and machinery due to the lack of hard currency.
Yet authorities also managed to rebuild reserves, which hit the highest level in 19 months in February, providing a window of opportunity for a bolder move.
"If you go for a much larger, credible FX adjustment you will get the inevitable overshoot – then you could actually 'do an Egypt' and see inflows returning, which could lead to FX appreciation," said Kevin Daly, portfolio manager emerging market debt at Aberdeen Asset Management.
Others say half-hearted policy moves will erode the already low levels of trust in Nigeria's central bank, especially after it failed to make good on last year's pledges to introduce market-based exchange rates.
"Nigeria theoretically floated the currency last summer and yet it didn't actually float so investors got burned," said Charlie Robertson at Renaissance Capital.
"If you have multiple exchange rates and uncertainty about where we are going ... then investors will be slow to respond to even a more competitive currency." (Additional reporting by Sujata Rao; Editing by Gareth Jones)