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Naira bounces against dollar as lending rate drops

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Nigeria’ local currency recoups loses against the Dollar at the weekend, exchanging for N364 as against the N370 it earlier exchanged for at the parallel market last week as Dollar liquidity rises on back of offshore inflows

It was quoted at 366.79 per dollar for investors. On the official market window it traded at around 305.90 against the dollar.

Meanwhile, the country’s overnight lending rate also dropped to 12 per cent after hitting almost 100 per cent last week due to a liquidity squeeze as lenders paid for hard currency and treasury bills purchased from the Central Bank of Nigeria.

National Daily reports that money market rates had moderated last Thursday after the Federal Government disbursed N224.54bn ($715.10m) in budget allocations to the three tiers of government, boosting liquidity.

The CBN also repaid around N95.7bn in matured treasury bills, to boost liquidity, traders said.

Subsequently the CBN sold around N26.90bn at an open market treasury auction on Friday to soak up naira liquidity. Traders said the money market remained liquid despite the auction.

One trader expected rates to rise up to 30 per cent next week as the CBN issues more securities to mop up part of government disbursement from the banking system.

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The CBN has been injecting the US currency into the market even as dollar liquidity swells with rising investor interest in Nigerian assets.

Meanwhile, Ghana’s cedi could lose ground next week, undercut by increasing corporate dollar demand unless the central bank scales up its weekly sales to support offshore inflows, an analyst said.

The local unit was trading at 4.43 to the dollar by midday on Friday, weaker than 4.38 a week ago.

“Corporate demand has firmed this week without matching inflows and we expect this trend to continue into next week unless the central bank comes in robustly,” an Accra-based currency analyst Chris Fiagbe said

The kwacha is expected to firm, supported by hard currency inflows from companies preparing to pay mid-month taxes and due to rising copper prices.

Commercial banks quoted the currency of Africa’s number two copper producer at 8.9000 per dollar from a close of 9.1600 a week ago.

 

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