Naira to appreciate further this week – Experts

Financial sector operators have predicted that the interbank foreign exchange rate and the parallel market exchange rate will converge at N375 per dollar, implying further appreciation of the naira to N375 per dollar in the parallel market.

This optimism, National Daily gathered, followed last week’s appreciation of the naira to a 7-month high of N390 per dollar in the parallel market, in response to sustained dollar injection by the Central Bank of Nigeria (CBN).

From N445 per dollar the previous week, the parallel market exchange rate dropped steadily throughout the week to close at N390 per dollar, indicating 12.4 per cent appreciation of the naira.

According to Afrinvest Plc, “Our interactions with operators and other stakeholders in the market suggest to us that with rates converging towards the N375/1 retail intervention rate, the apex bank may be eyeing unified FX rates at N380.00/1-N370.00/$ before cutting intervention to give way for a well-functioning interbank market.”

However, Afrinvest Plc said this remains unlikely in the interim given the absence of the political will and overarching implication of this on price-level and public welfare.

The huge appreciation was triggered by combination of decline in dollar demand and further injection of dollars by the CBN. Bureaux De Change (BDC) operators told National Daily there is little dollar demand in the market, while people who had hitherto horded dollar are offering them for sale to avoid further financial loss.

During the week, the CBN injected $264.3 million dollars comprising $181.3 million for 60 days forwards transaction and $83 million to meet customers demand for personal travel allowance, business travel allowance, school fees and other invisible transactions.

Addressing the press after the Monetary Policy Committee (MPC) meeting on last week, Emefiele warned that those doubting CBN’s ability to sustain the programme would be the losers as, according to him, the rates were already converging.  He said, “We have seen the foreign exchange rates now converging and we are strongly optimistic that the rates will converge further.

“In terms of sustainability, it is important for us to state at this point that reserves are trending upwards, close to $31 billion and the fact that we have done this consistently up to four to five weeks should tell everybody or those who doubt the strength of the CBN to sustain this policy that we are able.”