Naira Remains at N465/US$ Despite BDCs Expecting $50.9m Injection from CBN

The Nigerian Naira remained under pressure despite the Central Bank of Nigeria’s foreign exchange sales to the bureau de change operators (BDCs).

Since the apex bank resumed forex sales about two weeks ago, the local currency had only improved slightly against global counterparts as investors and businesses doubt the central bank’s ability to sustain forex intervention given the weak foreign reserves and low oil prices.

Two weeks ago, the apex bank injected $51.8 million into the foreign exchange market to ease scarcity and support Naira’s value, however, despite the amount injected, the local currency only moderated slightly from N480 to a US dollar to N443 before depreciating back to N465 following the increase in electricity tariff and complete subsidy removal.

In what appeared like investors have started pricing in a further decline in consumer spending, especially with inflation hovering above 13 percent and expected to rise further with an increase in prices.

Also, Nigeria’s unemployment rate remained high at 27.1 percent, meaning apart from weak revenue generation and definitely low tax revenue, businesses will not be creating enough jobs to cushion the impact of COVID-19 on the economy.

A situation expected to further weigh on Naira outlook against global counterparts, even with central bank forex sales.

The Naira exchanged at N465 to a US dollar on Tuesday despite Bureau de change operators expecting $50.9 million forex allocation from the central bank today. This means, the market no longer expect a meaningful impact from the apex bank intermittent intervention because of the disparity in the amount being injected and forex backlog estimated at slightly over $5 billion.