… as monthly forex inflow drops by 414.3% in two years
Naira is expected to appreciate further this week following the accretion in external reserves and the continued intervention of the Central Bank of Nigeria (CBN) in the foreign exchange market.
The external reserves have risen to $30.03 billion as of March 9, according to data from the website of the CBN. The CBN has so far injected over $1.2 billion into both wholesale and retail interventions in the interbank market.
Consequently, the naira firmed up to N455 per dollar as of Friday last week, from N460 it traded the previous days at the parallel market.
“We expect further stability in the foreign exchange market due to likely increase in supply amid build-up in foreign exchange reserves,” analysts at Cowry Asset Management said.
Aminu Gwadabe, acting president, Association of Bureau De Change Operators (ABCON), said “we expect the naira to appreciate further next week as CBN is considering for a review of our weekly allocation next week to further widen the liquidity at the BDC sub sector to complement the interbank market.”
The BDCs are hopeful of further naira appreciation next week to further discourage hoarding and speculation that is causing resistance to rate stabilisation, he said.
The weekly movements in most dated forward contracts at the interbank Over The Counter (OTC) segment suggested future stability of the naira viz-a-viz the US greenback amid an increase in the foreign exchange reserves – external reserves increased week-on-week by 1.10 percent to $30.01 billion as of Wednesday, March 8.
The one-month, three months, six months and 12 months forward contracts remained stable w-o-w at N315.34/$, N323.27/$, N331.53/$ and N349/$, respectively. The spot rate however depreciated by 0.18 percent to N305.80/$ despite $7.5 million in intervention sales by CBN to banks.
Meanwhile, the monthly foreign exchange inflow into the CBN has within two years declined by 414.3 percent to $700 million from $3.6 billion in the first quarter of 2014, according to Godwin Emefiele, governor, CBN, who assumed office in June 2014.
The demand for foreign exchange had continued to be about $4.8 billion monthly. The decline was as a result of sharp drop in the prices of crude oil, worsened by low production level and the country’s inability to save.
Consequently, external reserves, which stood at a record high of $62 billion in September 2008, after the country had spent $12 billion in settling the Paris Club debt, fell to $25 billion last year before picking up to the current level of $30.04 billion.
“It is quite surprising and disingenuous that some of the people talking today about how we can manage our exchange rate were the same persons who frittered away these reserves such that when I assumed office, I met only $37 billion in FX reserves,” Emefiele said at the Vanguard Personality of the Year award on Saturday in Lagos.
However, he urged Nigerians to support 41 items policy and see it as an opportunity to restructure, resuscitate local manufacturing, and expand job creation for the citizens.
The policy has been used to achieve significant sufficiency in cement, a product whose importation could have been costing the nation over $3.2 billion in forex reserves annually, he said.
According to Emefiele, the high rate of exchange in the parallel market is as a result of a lot of illegal and criminal activities being carried out there.
“The CBN cannot sit idly and allow such faceless and criminally minded people to destroy the currency under the guise of a free float as is being canvassed by some so-called experts,” he said.
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