Naira rebound continues for fourth day, now N300/$

The current appreciation of the local currency, the naira in the last four consecutive days, climaxing at N300/$, is an indication that better days are ahead for manufacturers and importers, some analysts said last night.

The CBN sees this as a good development, and  says that good behaviour and discipline among currency dealers would encourage sustainability. Ibrahim Muazu, director, corporate communication, CBN told BusinessDay last night that the CBN is committed to ensuring stability of foreign exchange.

Although the analysts contend that the appreciation lacked fundamentals, they however observed that the development showed that speculators were gradually losing out, saying that they perceived the naira stabilising at N300/$.

  However, they were unanimous in their submissions that the Central Bank (CBN)’s inability to fashion out a well-defined exchange rate policy is creating speculative opportunities for some people, with the attendant pressure on the naira.

The currency has witnessed some turbulence from N400/$ last week, but has been appreciating for the fourth day running, closing at N300/$ yesterday, BusinessDay findings have shown.

The exchange rate is the price of a currency relative to another currency. This is the price at which external and internal economic factors are aligned, while the policy is the process used to determine an exchange rate.

However, currency dealers and analysts have fingered speculation, which has reduced to the barest minimum, as the reason for local currency appreciation.

Analysts yesterday charged the Federal Government through the Central Bank, to take advantage of the appreciating naira to come up with policies that would sustain it.

Ayodeji Ebo, head, investment research, Afrinvest Securities limited, said yesterday that the local currency may stabilise around N300 per dollar.

Ebo said with time, devaluation has to be considered, based on depleting foreign reserve, now at $27.8 billion as at as February 22, 2016, occasioned by low oil prices.

He explained that the naira depreciation to as low as N400/$ last week was as a result of speculation based on reports from the Bankers Committee, that accessing forex for health and education overseas would be restricted.

Friday Ameh, an energy analyst, said the lack of policy was hurting businesses and homes, while creating a certain level of uncertainty that barred investors from tapping into the virile market. Ameh urged the CBN to do something urgently to encourage foreign investors into the economy.

Bismarck Rewane, chief executive officer, Financial Derivatives Company said recently, that “Whether we like it or not, we have two options: Do something and have a policy, or do completely nothing.”

Johnson Chukwu, Chief Exective, Cowry Asset Management, said, “ One of the ways out of the current shortage of foreign exchange which has led to some form of rationing is to broaden the sources of forex inflows beyond the proceeds of crude oil sales. This the CBN can do by devaluing our local currency and removing some of the controls, so as to encourage inflows from foreign direct investors, as well as portfolio investors.

“Without a market oriented foreign exchange policy regime, foreign investors will continue to stay away from investing in the Nigerian market. The government should complement the currency liberalisation with reform of the ownership structure of key infrastructure, by creating the necessary legal/regulatory and fiscal frameworks for private sector investment in infrastructure.

“This will attract international funding for concessioned roads, airports, rail lines, etc, which will help stabilise the exchange rate as well as diversify the economy. The third plank of the reforms should be to deregulate the downstream sector of the petroleum industry so as to encourage the establishment of refineries and reduce the demand for forex currently used for importation of refined petroleum products.”

But naira/dollar exchange rate rebounded after the CBN came out with its position that it has not stopped the allocation and sale of Foreign Exchange for purposes of paying school fees and settlement of medical bills overseas.

“A lot of speculators hurriedly sold their dollars, haven seen the naira appreciating after Buhari’s comment on no devaluation and the CBN’s stance on not stopping sale of forex for school fees and medical bills overseas. It may stabilise at N300/$”, Ebo told BusinessDay by phone.

Aminu Gwadabe, acting president, the Association of Bureau De Change Operators of Nigeria (ABCON) sees the naira appreciating further, as speculative activities wind down.

“No more speculation, no more hoarding of the  dollar. Currency dealers and oil majors are bringing dollars into the market. But relevant authorities should take advantage of this opportunity to ensure sustainability of the naira by way of partnership with BDCs on measures that would help shore-up the naira”, Gwadabe told BusinessDay by phone.    

He said the association was working to introduce a single quote across the forex market and maintain an exchange rate spread of 3.5 percent.

President Buhari, on Saturday, again rejected the idea of devaluing the currency of Africa’s biggest oil producer, despite a hammering of the naira at the foreign exchange market last week.

John Omachonu & HOPE MOSES-ASHIKE