Naira firms against dollar as CBN keeps rate unchanged

The naira on Tuesday strengthened against the dollar across all foreign exchange (FX) market after the Central Bank of Nigeria (CBN) kept the Monetary Policy Rate (MPR) unchanged.

The Monetary Policy Committee (MPC) yesterday in its first meeting of the year, voted to retain the MPR, Cash Reserve Requirement (CRR), Liquidity Ratio (LR) and the asymmetric corridor of +2/-7 around the MPR.

Consequently, the naira firmed against the dollar by N1 or 0.38 percent each at the Bureau De Change segment of the FX market and parallel market, respectively.

After trading yesterday, the local currency closed at N302/$ compared with N303/$ the previous day at the BDC segment. It closed at N304/$ yesterday as against N305/$ on Monday at the parallel market.

At the inter-bank FX market, the naira gained N0.36k or 0.18 percent against the dollar as it closed at N198.91k/$ on Tuesday from N199.27 the previous day, data from FMDQ revealed.

Godwin Emefiele, CBN governor, while addressing journalists in Abuja, said the apex bank was fine-tuning the framework for FX management with a view to ensuring a more effective and liquid FX market, taking into account Nigeria’s strategic development priorities; with the policies being designed within an environment of regularly ensuring consistency with monetary and fiscal policies.

Analysts at WSTC Financial Services Limited, said: “We believe that fast-depleting FX reserves, which has resulted from low oil earnings amid a relatively inelastic FX demand, will continue to impair confidence in the ability of the CBN to continue to support the naira at current value.

“Hence, we expect the downward pressure on the naira in the interbank forex market to persist, reflecting the realities in the macro economy.”

The analysts are however of the opinion that economic exigencies will eventually trump political considerations. “We believe that the current restrictive measures adopted by the CBN will not be sustainable in the mid-term, and as such, retain our expectation of an adjustment of the currency,” they said.