Naira drops against Pound as MPC decides on economy today

The Nigerian currency, Naira, on Monday, dropped to 474 to a Pound sterling against 470 traded over the weekend at the parallel market.
This is just as the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is set to end its two days’ meeting today, Tuesday, July 25, to decide on the issues affecting the economy, such as the negative Gross Domestic Product’s, GDP’s, growth rate, foreign exchange market stability, among many others.

The naira, also, closed at 367 per US Dollar, dropping a point compared to 366 exchanged during the weekend but remained unchanged at 420 to the Euro at the parallel market.

At the official segment of the foreign exchange market, the local currency remained steady at 305.80, the same rate it traded on Friday and the previous day.

The Naira, at the Investors and Exporters FX window, opened at a depreciated rate of 365.96, against 365.43 opened to a dollar on the last trading day of last week, but closed at 366.37, the same rate it exchanged on Friday, indicating 0.08 per cent improvement when compared to last Thursday.

The Nigeria Autonomous Foreign Exchange Market (NAFEX) window, otherwise known as the Investors and Exporters FX window, recorded a daily turnover of $66 million as at close business on Monday, data obtained from FMDQ website has revealed.

Although experts had predicted that the Monetary Committee might hold interest rate at 14 per cent and Cash Reserve Ratio at 22.5 per cent, they, however, said that the weekly invention of CBN will aid the nation’s economy in exiting the current recession, as the manufacturing and non-manufacturing activities continued to increase.

The CBN, in a notice to commercial banks, announced plans to sell foreign exchange to manufacturers, airlines, fuel importers, and agriculture businesses at a special auction to clear backlog of foreign exchange obligations this week.

Researchers at Cordros capital said, “the impact on the Naira will be largely reflected across segments of the foreign exchange market. Thus, we expect the Naira to appreciate further against the Dollar in the week, while remaining stable against the Pound and Euro.”

Meanwhile, considering high inflation rate currently at 16.1 per cent in June, coupled with the continuous effort by the apex bank in mopping up liquidity from the system through incessant sales of Treasury bills and other market securities, financial analysts, have said that Monetary Policy Committee (MPC) of the apex bank will keep rate at current levels.

Despite the calls from various financial experts and stakeholders, including Manufacturers’ Association of Nigeria (MAN); and organized private sector, that the MPC should review its MPR from the current 14 per cent to 12 per cent, in order to enhance economic recovery, but the MPC at the end of its two days’ bi-monthly meeting, left all indices unchanged.

The committee, at the end of its last meetings, left MPR at 14 per cent, Cash Reserves Ratio at 22.5 per cent and Liquidity ratio at 30 per cent.

Consequently, the Nigeria’s GDP growth rate slowed to -1.3 per cent in first quarter (Q1) 2017 from -2.24 percent at the end of 2016. Latest data from National Bureau of Statistics (NBS) showed that the country’s inflation rate declined to 16.1 per cent in June, compared to above 18 per cent recorded earlier in the year.

However, the apex bank’s determination to sustain forex gains has seen the foreign exchange volatility in the country eased since the apex started its aggressive intervention in the forex market in February, with the injection of over $5 billion into the market.

The CBN, also mandate banks to sell forex to customers who demand for invisible such as personal travel allowance (PAT), Basic Transport Allowance (BAT), school fees and medical fees, asking them to create special desk for them in their branches.