FX: Naira to appreciate, as oil companies set to boost dollar liquidity
The nation’s currency, naira may stabilise next week on increased dollar liquidity from month-end greenback sales by oil companies.
Just as the CBN sold dollars on the interbank market for the fourth day to ease dollar shortages after the new forex regime started on Monday, traders said.
The naira traded at N283 to the dollar as at noon on Thursday, on volumes of $76.8 million, which traders attributed to the apex bank’s intervention.
The CBN had on Monday floated the local currency, ending a 16 months peg on the naira to allow the currency trade freely on the interbank market, but traders say dollar liquidity was tight, leaving the central bank as the main supplier of hard currency for the fourth day.
The naira was quoted within the range of N282-N284 to the dollar at the interbank market on Thursday, a range it has been trading at since the re-introduction of two-way quote after the Central Bank of Nigeria floated the naira.
Also, the local currency appreciated at the parallel market to N335 to the dollar as against N370 a dollar last week.
“As we approach month-end, we expect the multinational oil companies to begin their month-end dollar sales to generate some naira. This should provide supply of dollars to the market in the coming days,” local unit of Citibank said in a note.
Meanwhile, due to the current economic downturn in the country, Fitch rating agency in its latest rating has downgraded Nigeria to ‘B+’; outlook stable.
Fitch, however, forecasted the nation’s Gross Domestic Products (GDP) growth to fall to 1.5 percent in 2016, down from 2.7percent in the preceding year.
It projected Nigeria’s general government fiscal deficit to grow by 4.2 percent in 2016, with expected current account deficit to widen to 3.3 percent of GDP in 2016, from 2.6 percent in 2015
The rating agency, forecasted that the depreciation of the Nigerian currency, the naira will increase debt and debt service burden, adding that inflation would end year at lower than 12 percent.
