Pressure on the naira is expected to con¬tinue this week even as the Mon¬etary Policy Com¬mittee (MPC) meets next week to explore solutions to the growing uncertainty at the foreign exchange market.
This is because dealers may be hedging on the likely outcome of the first MPC to be presided by Sarah Alade, the interim governor of the Central Bank of Nigeria (CBN).
The expectation is height¬ened by the fact that external influences might affect the outcome of the meeting that is expected to strengthen the naira, curtail forex demand and ultimately improve the external reserves.
This is against the back¬drop of worsening external reserves balance, which tumbled week-on-week by 1.66% to USD38.79 billion as at Wednesday, March 12, 2014.
The local currency strengthened against the U.S. greenback at the official foreign exchange market following a 3.92% increased supply by the apex bank. At the bi-weekly Retail Dutch Auction, the banking regu¬lator offered USD800.00 million but sold USD797.69 million to end users.
Consequently, the naira strengthened by 0.01% (or N0.01) to N155.74/USD. However, it also depreci¬ated by 0.14% (or N0.23) to N164.93/USD at the in¬ter-bank market segment while it weakened against the dollar at the bureau de change by 0.29% (or N0.50) to N171.00. Howbeit, the NGN/USD exchange rate steadied at N172.00 at the parallel (or ‘black’) market.
Also this week, inter-bank rates are expected to moderate following FAAC disbursements worth N641.29 billion; maturing bonds worth N65 billion and maturing treasury bills worth N257.11 billion, viz: 91-day bills worth N50.28 billion; 141-day bills worth N42.93 billion; 150-day bills worth N66.91 billion; 182-day bills worth N33.27 bil¬lion; and 364-day bills worth N63.73 billion.
Speaking on next week’s
MPC meeting, an analyst said, “We expect greater priority for exchange rate stability which will likely ne¬cessitate maintenance or an upward review of Cash Re¬serve Requirement of banks. Howbeit, Monetary Policy Rate may be unchanged at 12.00%, given consideration for already high cost of funds to the real sector”.
“In line with our expec¬tations, inter-bank rates increased for all tenor buck¬ets amid relatively higher withdrawals than injec¬tions. CBN sold treasury bills worth N100.00 billion via Open Market Operations: 147-day bills worth N50.00 billion; 121-day bills worth N20.00 billion; and 122-day bills worth N30.00 billion – in addition to withdrawals for the purchase of forex (about N124.23 billion) and Federal Government bonds (N90 billion)”. The outflows exceeded inflows of N166.48 billion in matured treasury bills, viz the maturities con¬sisted of 101-day bills worth N26.05 billion; 142-day bills worth N97.05 billion; and 147-day bills worth N43.38 billion.
