• Tuesday, July 23, 2024
businessday logo

BusinessDay

Naira closes N305/$ as investors await devaluation at MPC today

businessday-icon

The naira yesterday dipped further against the dollar across segments of foreign exchange (FX) market due to shortage of supply, even as investors await the Monetary Policy Committee (MPC) decision on devaluation at today’s meeting.

The naira on Monday depreciated in value against the dollar by N5 or 1.67 percent each at the Bureau De Change (BDC) segment and the parallel market, respectively.

After trading on the same day, the local currency closed at N303/$ compared with N298/$ on Friday last week at the BDC segment of the FX market. It closed at N305/$ as against N300/$ traded Friday last week at the parallel market.

At the inter-bank FX market, naira weakened significantly against the dollar losing N1.98k/$ or 1 percent to close at N199.27k on Monday from N197.29/$ on Friday last week, data from FMDQ revealed.

The CBN’s clearing rate remained unchanged, closing at N197/$ at the inter-bank FX as seen on FMDQ website.

The fall of the naira has accelerated on the parallel market since President Muhammadu Buhari said in December that the central bank would show “some flexibility” with the naira to address investors’ concerns, remarks investors took as signal that devaluation would happen soon.

The central bank’s reluctance to let the official exchange rate fall is making investors reluctant to put money into the country, because they assume the currency will be devalued soon.

Bismarck Rewane, managing director/CEO, Financial Derivatives Company Limited, said the key issues facing the government were the fact that adjustment of the naira was now imminent, inevitable and imperative. This adjustment will have huge consequences for government finances, investment flows, export values and trade patterns. There will be short-term pain, but medium-term gain.

“Therefore, what do we expect? The currency will be allowed to glide into a path of quasi-equilibrium. An initial band of 185-220, will open the floodgates of demand, but will also encourage some investment inflows,” he said in a report.