CBN rallies support for local currency

… Naira steady at 390/$1 at parallel market

The Central Bank of Nigeria (CBN) again on Friday supported the local currency through the sale of treasury bills amounting to a whopping N107.64 billion($353m), foreign exchange dealers believed this move was part of efforts to soak up excess liquidity from the banking system and curb pressure on the Naira.

Even at this, the Nigerian currency over the weekend steadied at 390 to a dollar, the same rate it traded a day before the official closure of the forex market on Friday.

Although, this was a slight depreciated rate of the Naira compare to 388 per dollar sold on Thursday at the parallel market but dealers optimistic that the currency will appreciate further in the week ahead.

However, the apex lender sold N54.42 billion in the 167-day open market operations (OMO) treasury bills at 18 percent and 55.22 billion naira paper at 18.5 percent, traders said.

But the effect of the sale was countered by additional liquidity from the repayment of matured bonds forcing overnight lending rate down to 5 percent on Friday from 30 percent at the start of the week.

Traders said banking system liquidity was N246 billion in credits on Friday, up from N206.96 billion in deficit a week ago. The money markets were also expecting the monthly government budget disbursement next week.

The naira, against the Pound Sterling at the weekend gained five points to settle at 485 compare to 490 it traded a day before the end of the long trading week but steady at 415 to the Euro at the unofficial forex segment.

At the Bureau De Change (BDC) window, the naira was sold at N362 to the Greenberg, while trading at the interbank window remained unchanged at N305.85 to the dollar. However, the naira, appreciated marginally at the investment and export window, as it closed at N379.04, from the N379.89 it opened earlier on Thursday.

Meanwhile, reacting to the call from different quarters that the that multiple exchange rate in the forex market is not helping in addressing the forex crisis, the CBN has explained that multiple exchange rate has eliminated “frivolous demand” of foreign currency.

Traders at the market were hopeful that the naira would bounce back as the CBN sustained liquidity boost at the BDC subsector.

The Acting Director, Corporate Communications Department at the CBN, Isaac Okorafor, said the multiple exchange rates was aimed at improving dollar supply while allowing investors to trade their own dollars at a more market-determined rate.

Furthermore, he said the CBN had observed that quite a good number of dealers were adhering to the forex guidelines. Nevertheless, he said the CBN will continue to monitor the activities of authorized dealers to ensure that no outfit or individual circumvents the laid down forex rules.