Forex: Dealers expect rebound, as CBN takes appreciation credit

The Nigerian currency, the Naira on Friday relapsed from days of significant appreciation against the dollar at the parallel market, but foreign exchange dealers are optimistic that it would rebound positively this week, as the Central Bank of Nigeria (CBN) indicated it will regularly intervene in the market in continuation of its strategy to further strengthen the value of the Naira.

Although, the nation’s currency lost N7 to exchange at N465 to a dollar after closing at N458 on Thursday, the Pound Sterling and the Euro were traded at N542 and N480 respectively.

But the forex traders believed that the local currency will continue to appreciate if the status quo was maintained.

On its part, the CBN said the recent appreciation of the Naira against other currencies was the result of its market monitoring and intervention.

According to its spokesperson, Isaac Okorafor, Acting Director, Corporate, while dismissing the reports that illegal sales of foreign currencies at ridiculous rates was responsible for the change in forex policy.

“I want to state categorically that there is no relationship whatsoever between the allegations that dollar was being sold at 61 kobo and the current appreciation of the naira,”

“What led to the appreciation of the naira was that the CBN did an intelligent work on the market and realised that what was driving the demand on the Bureau De Change (BDCs) and parallel market was speculation”, he explained.

However, at the Bureau De Change (BDC) window, the Naira traded at N399 to a dollar, CBN controlled rate, while Pound Sterling and the Euro closed at N610 and N520.

Trading at the interbank market saw the Naira being sold at N305.25 to a dollar

It would be recalled that the CBN injected over $500million dollars into the market, to boost liquidity, but the local currency end the week on a downward trend compare to the appreciable positioned maintained in the preceding week.

Hence, traders in the market expressed concern about the sudden decline f the Naira in spite of the gains earlier recorded.

Commenting on this, AlhajiAminuGwadabe, President, Association of Bureau De Change Operators of Nigeria (ABCON), said there was need for a review of the distribution mechanism.

“Many banks are selling to only clients with current accounts and not to savings account holders and there is also increasing demand for forex from our neighbouring countries.

“The different applicable exchange rates and volumes with Travelex and banks need to be harmonised and with that of BDCs to reduce friction,” Gwadabe said.

Just recently, the value of the Naira recorded the highest and fastest gain of 11.9 percent in four days at the parallel market, in over three years.

This follows the CBN decision to sell a total of $372.4 million to ease the pressure on the local currency.
Meanwhile, Nigeria’s overnight interbank lending rate climbed to 16 percent on Friday from about 13 percent at the end of last week, as the central bank debited commercial banks’ accounts for dollar purchases and also issued treasury bills to mop up liquidity.

The central bank sold dollars twice last week to clear a backlog of demand for companies and private individuals to ease pressure on the naira.

Traders said the regular forex auctions and the Treasury bill sales drained liquidity. The money market opened with a cash deficit of about 2.3 billion naira on Friday, compared with a deficit of 45.64 billion naira last week.