Nigeria’s currency at the weekend appreciated by N0.67k as the dollar traded at an average rate of N464.33k, from N465 traded on Friday on the black market.
The naira appreciation is a result of a slowdown in demand for the greenback by the end-users.
This is also happening ahead of the dollar allocation to about 5,000 Bureau De Change (BDC) operators by the Central Bank of Nigeria (CBN) on Monday, September 21, 2020.
Investigations show that while currency traders across Lagos’ parallel markets buy dollars from individuals at N460, they sell at N464 and N465 to the end-users.
“We expect the naira to stabilize against the USD, especially at the Bureau De Change market, amid CBN’s increasing capacity to intervene; hence, the positive impact could trickle down to the parallel (black) window,” analysts at Cowry Asset Management Limited said.
The external reserves moved northward in the month of September – rising by 0.42 percent to $35.81 billion as of September 17, 2020, from $35.66 billion.
The price of Brent crude, which fell to below $20 per barrel in March 2020, is gradually recovering as it stood at $43.13 per barrel as of September 18, 2020.
Naira fell by N6 as the dollar was sold at N466 on Friday from N460 on Thursday at the Bureau De Change (BDC) segment of the foreign exchange market.
The daily forex turnover declined further by 4.43 percent to $83.35 million on Friday from $87.78 million recorded on Thursday at the Investors and Exporters (I&E) forex window, data from FMDQ revealed.
The CBN is expected to sell some dollars to BDCs on Monday as they funded their accounts on Friday.
The CBN had in an August 27, 2020 circular said the purchase of foreign exchange by BDCs would be on Mondays and Wednesdays in the first instance. The BDCs are to ensure that their accounts with the banks are duly funded with the equivalent naira proceeds on Fridays and Tuesdays accordingly.
The CBN resumed dollar sales to BDCs on Monday, September 7, 2020, and had supplied over $200 million to the BDCs. The apex bank sells $10,000 twice weekly to this segment of the foreign exchange market.
Meanwhile, the Monetary Policy Committee (MPC) will meet Monday and Tuesday to discuss the direction of the Monetary Policy Rate (MPR).
“We do not see the MPC jack up the policy rate in the new week given that a reversal in its expansionary policy may further hamper demand-driven growth – which is already in negative territory at minus 6.10 percent. Hence, we expect the Monetary Committee to hold MPR at 12.50 percent in order to further consolidate on its several measures put in place to lift Nigeria out of the anticipated recession in Q3 2020 and to restore the country’s output growth to the pre-COVID-19 levels,” the analysts said.
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