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The nation’s currency which strengthened to between N376 and N370 per dollar last week Friday at the black market is expected to maintain gains as the Central Bank of Nigeria (CBN) sustains its interventions at the foreign exchange market.
Naira on Friday appreciated against the U. S dollar at the investors and exporters window gaining N1.66k to close at N378.56k, data from FMDQ show.
However, at the inter-bank foreign exchange market, the local currency again weakened marginally by N0.05k as it closed at the rate of N305.50k on Friday from N305.45k the previous day.
Meanwhile, indications at the weekend suggested that the rates between the interbank and BDC may soon converge, with the difference now down to a few naira.
Observers, while commending the bold move of the CBN, urged the Bank to remain committed to its goal for the benefit of the Nigerian economy.
We expect further stability in the foreign exchange market with possible appreciation against the USD subject to CBN’s level of intervention, analysts at Cowry Asset Management limited said.
In spite of the naira’s strong showing in the foreign exchange market last week, which saw the currency gain substantial ground against the United States dollar, selling at N363/$1 compared to the previous rate of N378/$1 in abuja, sources at the Central Bank of Nigeria (CBN), at the weekend, disclosed plans by the apex bank to inject more funds into the market this week.
According to the sources, the CBN was not resting on its oars and remained determined to ensure a convergence between the interbank and Bureau de Change (BDC) rates soon, hence the move to continue its intervention in the interbank market.
It will be recalled that the CBN on Tuesday, May 30, 2017, intervened in the inter-bank market to the tune of $482.6 million with the Retail SMIS allocated the sum of $285,779,350, while the $100 million was offered in the Wholesale SMIS auction window. The Small and Medium Enterprises (SMEs) window got an allocation of $52 million, while the invisibles segment, comprising Basic Travel Allowance (BTA), Personal Travel Allowance, medicals and tuition fees, among others, was allocated the sum of $45 million.
Speaking with newsmen at the weekend, the CBN Acting Director, Corporate Communications, Isaac Okorafor, said there were indeed plans by the CBN to make necessary interventions in the forex market, in line with its earlier resolve to achieve forex rates convergence and liquidity in the market.
On how the Bank hoped to sustain its interventions, Okorafor said the CBN had enough forex to meet the requirements of all customers, who had genuine need for the dollar. He also expressed optimism that the current policy of the Bank and the cooperation of all stakeholders would check the unwholesome activities of speculators.
The CBN has been intervening on the official market to try to narrow the spread between the official interbank and black markets. It has sold over $4 billion since February, improving dollar supply and providing support for the naira.
The weekly movements in most dated forward contracts at the interbank OTC segment suggested future stability of the Naira/USD exchange rate despite declining foreign exchange reserves – external reserves decreased month-on-month by 1.73 percent to USD30.33 billion as at Wednesday, 31 May 2017. The 1 month, 3 months, 6 months and 12 months forward contracts remained stable week-on-week at N320.00/USD, N328.07/USD, N336.56/USD and N354.04/USD respectively. Furthermore, the spot rate depreciated by 0.03 percent to N305.45/USD despite the USD7.5 million in intervention sales by CBN to banks.
HOPE MOSES-ASHIKE
