Naira flat at 1,125/$ after holidays as Goldman sees better days ahead

A dollar sold for N1,125 on the streets on Friday after a three-day holiday break that led to a moderation in demand.

The currency was flat compared to the N1,120 it closed on Thursday, according to data from multiple traders who reported irregularity of trading volumes during the holiday season.

With banks closed for the festivities, transactions occurred sporadically, leading to deviations from standard market rates. Traders emphasized that the rates quoted during the holidays were not representative of normal market conditions, as transactions were limited.

“We are purchasing at either N1,120 or N1,115 and selling at N1,130 or N1,125 per dollar,” explained a trader at the Lagos Airport to BusinessDay on Friday.

Some traders expect the naira to appreciate above N1,120 per dollar as more dollars are coming into the market since the implementation of some FX policy measures as directed by the Central Bank of Nigeria (CBN).

Goldman Sachs sees naira extending world-beating rally

The naira could also extend gains in the official market in the coming days, provided policymakers stay on track, according to a Goldman Sachs Group Inc. economist.

The naira, which opened at N1,230/$ on Friday, according to data by FMDQ Securities Exchange, is the best-performing currency in the world this month.

The naira has rallied 12% against the dollar in April, adding to its 14% surge in March. Capital inflows and interest rate increases are helping it to retrace steep losses caused by two devaluations since June after the government loosened currency controls.

Goldman Sachs had in March forecast the naira to hit N1,200 in 12 months as the CBN’s reforms deliver results.

The Association of Bureaux De Change Operators of Nigeria (ABCON) has given its backing to the latest directive by the CBN on stopping the use of foreign currency denominated-collateral for accessing naira loans.

The CBN’s directive banning the use of Non-Export Domiciliary Account Collateral for naira loans will boost dollar liquidity, support reserves accretion and strengthen the financial services sector, Aminu Gwadabe, president of ABCON said.

According to the CBN directive to banks, the use of foreign currency-denominated collaterals for Naira loans is now prohibited, except in cases where the collateral is in the form of Eurobonds issued by the Federal Government of Nigeria or guarantees provided by foreign banks, including Standby Letters of Credit.