Connect with us

Forex

As CBN Pumps Another $221m, Analysts Expect Dollar to Slide to N400-N425

Published

on

Dollar
  • As CBN Pumps Another $221m, Analysts Expect Dollar to Slide to N400-N425

As part of efforts to sustain its defense of the naira, the Central Bank of Nigeria (CBN) on Thursday sold $221,371,218.04 to banks in its second special wholesale intervention forwards since the new foreign exchange (FX) policy actions were announced a week ago.

A breakdown of the amount sold by the CBN showed that it auctioned $162,850,000 to 10 banks in a transaction with 30 days tenor, while six banks participated in a separate auction with 60 days tenor in which $58,521,217.04 was sold.

Owing to the new measures introduced by the central bank last week, the naira which had fallen to as low as N525/$ penultimate Friday, strengthened remarkably by N75 in just five days, to close at N450/$ last Friday.

With improved FX liquidity, some market analysts were cautiously optimistic yesterday that the naira could climb to N400-N425 to a dollar in the coming days.

Should this happen, the CBN would meet its objective of closing the gap between the interbank and parallel market rates.

The acting Director, Corporate Communications Department, CBN, Mr. Isaac Okorafor, said the CBN’s intermediation in the FX market through the wholesale interventions was aimed at easing the pressure on Nigerians who need to meet obligations that fall under visible and invisible transactions.

While expressing optimism that the wholesale intervention of the CBN would substantially ease pressure on the FX market, Okorafor said the CBN would continue to with the interventions based on qualified bids from banks on the requests of their customers.

He reiterated that the Bank was more than ready to support the interbank market by ensuring liquidity and transparency to guarantee efficiency in the FX market.

Renaissance Capital (Rencap) Limited, in a note at the weekend, also confirmed that rising oil prices and a deal with the Niger Delta militants had addressed both the oil price and volume challenges that hurt the country so much in mid-2016.

“FX reserves have risen over 20 per cent to $29 billion,” which Rencap said gave the CBN the comfort to announce changes to its FX policy and injected more dollars into the local market.

It added: “We think N450-500/$ would attract investors even without $20 billion of cheap International Monetary Fund (IMF)-led financing.

“One of our Real Effective Exchange Rate (REER) models – the 22-year model which corresponds to a period when oil averaged $55/bl – implies fair value for the naira at N370/$, which via inflation should become N400/$ by end-2017.

“At the parallel rate of NGN500/$, Nigeria has the cheapest currency in Africa, and even at NGN450/$ it would still rival Egypt at EGP15.8/$ (the third cheapest in Africa).

“Given this, a full float of the currency would likely attract billions of dollars to Nigeria, similar to how Egypt has attracted $9 billion since its float in November.

“The vast majority of Nigerian and foreign potential investors ignored Nigeria in 2016 due to exchange rate difficulties, but rising oil prices and production (double the 0.9mbpd 2016 lows) suggest some opportunities may emerge in 2017.

“A best-case scenario is very unlikely, but some frontier investors may well be able to find value in the country at an oil price of $55/bl and an exchange rate of N450-500/$.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Continue Reading
Comments

Naira

Nigeria Hits Historic High as Currency in Circulation Surges to N3.69 Trillion

Published

on

naira

Nigeria’s currency in circulation surged to a historic high of N3.69 trillion, according to data released by the Central Bank of Nigeria (CBN).

This figure represents an increase of N43.07 billion or 1.18 percent from the total of N3.65 trillion reported in January 2024 and a 13.64 percent year-on-year rise from N3.25 trillion reported in February 2023.

Currency in circulation encompasses the physical cash, including paper notes and coins, actively used in transactions between consumers and businesses within the country.

The latest statistics indicate a considerable uptick in the availability of cash within the Nigerian economy.

The surge in currency supply comes amidst lingering concerns over a potential cash crunch following the monetary policy adjustments by the CBN, particularly the aggressive tightening stance of the Monetary Policy Committee (MPC).

Analysts attribute this spike to various factors, including the fear factor stemming from the cash crunch experienced in 2023 and lingering uncertainties surrounding the administration of physical currency.

Despite the surge in currency in circulation, Nigeria’s economic growth remains sluggish, with projections indicating growth rates of around 2.9 percent to 3.1 percent for 2024.

Also, inflation remains a significant concern, with the headline inflation rate climbing to 31.70 percent in February 2024 from 29.9 percent reported in January 2024, according to data from the National Bureau of Statistics (NBS).

The CBN’s proactive approach to monetary policy, including a historic increase in the monetary policy rate (MPR) to 24.75 percent, underscores the central bank’s commitment to addressing economic challenges and fostering stability amidst persistent pressures.

Continue Reading

Naira

Nigerian Naira Surges to N1,350 per Dollar in Parallel Market

Published

on

New Naira notes

The Nigerian Naira has appreciated to N1,350 per dollar in the parallel market, a significant gain from its previous rate of N1,430 per dollar just a day earlier.

Similarly, in the Nigerian Foreign Exchange Market (NAFEM), the naira strengthened to N1,382.95 per dollar, indicating an upward trend across key forex segments.

Data from FMDQ revealed that the indicative exchange rate for NAFEM fell to N1,382.95 per dollar from N1,408.04 per dollar on the previous day, representing a gain of N25.09 for the naira.

This surge in the naira’s value has widened the margin between the parallel market rate and NAFEM to N32.95 per dollar from N21.96 per dollar previously.

Analysts attribute this impressive surge to recent foreign exchange reforms implemented by the Central Bank of Nigeria (CBN).

These reforms, including the consolidation of exchange rate windows and liberalization of the FX market, have contributed to bolstering the naira’s strength against the dollar.

The CBN’s proactive measures aim to promote stability, transparency, and liquidity in the foreign exchange market, fostering confidence among investors and strengthening the national currency.

Continue Reading

Forex

CBN Governor Reveals $2.4 Billion Forex Forwards Under Investigation

Published

on

Naira Exchange Rates - Investors King

Governor Yemi Cardoso of the Central Bank of Nigeria (CBN) disclosed that law enforcement agencies are currently investigating foreign exchange forwards valued at $2.4 billion.

This announcement came in the wake of the Monetary Policy Committee (MPC) meeting held in Abuja on Tuesday, March 26.

Governor Cardoso shed light on the meticulous forensic audit conducted on these transactions, which uncovered numerous discrepancies, rendering them ineligible for payment.

The CBN, while settling certain tranches of FX backlog, encountered transactions riddled with issues concerning their authenticity.

To address these concerns, Deloitte management consultants were enlisted to conduct a comprehensive forensic analysis spanning several months.

The audit revealed a multitude of irregularities, including allocations disbursed without corresponding requests, lack of proper documentation, and instances of outright illegality.

Cardoso emphasized the gravity of the situation, stating, “We refused to validate them because, apart from the fact that documentation was not satisfactory in many cases, they were outright illegal.”

He underscored the commitment of law enforcement agencies to investigate these transactions thoroughly.

Despite concerns about potential backlogs among stakeholders, Cardoso assured that the market remains open and transparent for addressing any outstanding contractual obligations.

The CBN has diligently verified and settled recognized backlogs of forward transactions.

This revelation comes at a critical juncture as Nigeria grapples with economic challenges, including inflationary pressures.

The MPC’s decision to raise the benchmark interest rate to 24.75 percent reflects efforts to stabilize prices and restore the purchasing power of the average Nigerian.

As investigations unfold and regulatory scrutiny intensifies, the CBN’s commitment to transparency and financial integrity will be closely monitored by stakeholders across the nation.

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending