The foreign exchange and money markets were on Tuesday thrown into turmoil as the nation’s currency, the naira, for the first time exchanged at N200.10k against the US dollar at the inter-bank foreign exchange market, BusinessDay reveals. With this rate, the local currency on Tuesday lost N3.70k/$ or 1.8 percent to the dollar after it closed at N200.10k/$ compared to N196.40k/$ the previous day, data from Financial Markets Dealers Quotations (FMDQ) show.
“Political uncertainty resulting from the postponement of the general election by Independent National Electoral Commission (INEC) is putting pressure on the naira”, Sewa Wusu, head, research & investment advisory, Sterling Capital, told BusinessDay on phone. He sees increased demand pressure for foreign exchange as going beyond the CBN’s intervention, admitting that the apex bank has put in place various policies to defend the naira.
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The implication of this, according to him, is that investors may begin to exit the market as the political outlook remains uncertain. Meanwhile, at the official market, bureau de change segment and parallel market, naira remained stable at N168/$, N207/$ and N208.50k/$, respectively. The Central Bank of Nigeria (CBN) on Monday offered $200 million but sold $199.9 million to some deposit money banks at the rate of N168/$ at the Retail Dutch Auction System (RDAS).
At the money market on Tuesday, the overnight ten- or of the Nigeria Inter-Bank Offered Rates (NIBOR), which is the temporary rate used by banks to meet immediate liquidity needs rose to 65.96 percent, this represents a percentage change of 28.42 percent.
Also the 3 month tenor increased to 16.41 percent from 16.23 percent the previous day. Data obtained from CBN’s website show that it held N28.1 million Open Market Operation (OMO)/ under-writing by MMDs on Tuesday. However, 1 month tenor and 6 months tenor dropped to 15.57 percent and 17.08 percent from 15.71 and 17.23 percent, respectively, the previous day. The central bank said on Tuesday the foreign ex- change market was understandably nervous after the decision to postpone elections originally set for February 14, but said it was nothing to worry about.
The bank is committed to sustaining a “stable and orderly” market, it added. The central bank has been intervening directly with dollar sales to lenders to support the local currency but not enough to quench demand, which it has attributed to speculation, Reuters reports.
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