Naira sustains recovery after CBN’s further rate hike

The naira strengthened further on the parallel market on Wednesday, a day after the Central Bank of Nigeria raised the monetary policy rate again to curb inflation.

Bureau de Change (BDC) operators in Abuja quoted the naira at between 1,280 and 1,300 per dollar on Wednesday afternoon as against 1,350/$ on Tuesday.

Some BDC operators at the popular Zone 4 market in Abuja confirmed that the naira is fast bouncing back.

When contacted by BusinessDay, an operator who identified himself simply as Yusuf offered to sell the dollar at N1,290.

“Government’s target is to bring the rate to N1,000 a dollar and that is what we are all praying for,” he said. “There is now money in the market. Apart from the allocation by the CBN, private people are bringing money to sell. That’s why the rate is dropping. Dollar is available now.”

Amongst other measures to tame inflation, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) jacked up the monetary policy rate (MPR) by 200 basis points to 24.75 percent.

The committee also adjusted the asymmetric corridor around the MPR to +100/-300 basis points.

But beyond the rate hike, the market is also responding to recent moves by the CBN to sanitise the market and strengthen the naira, including moving against speculative demand coupled with resuming its twice a week dollar sales to the BDCs of $10,000 at each auction.

Analysts say that the central bank’s clearing of the foreign exchange backlog has brought back transparency into the market and encouraged more FX inflows.

The CBN is also keeping a close watch on the market, especially the parallel market in a move to deal with widespread speculation.

Yusuf confirmed that for over a month, law enforcement agencies have permanently been in the market to curb the activities of speculators.

“For almost one month, they have been in the market, and they use to control the price. They will not allow the rate to go up like that all the time they are here,” Yusuf said.

Another BDC operator, Usman, who also spoke to BusinessDay quoted N1,280 while his colleague said he would sell at N1,150.

On the wide discrepancy in rates, they said some of the rates being quoted may not be real as many of their colleagues in the market are equally “scared since no one really knows whether the person asking for the rate is a real customer or government people.”

Announcing the outcome of the MPC meeting on Tuesday, Olayemi Cardoso, governor of the CBN, had reiterated satisfaction with the level of stability achieved in the foreign exchange market in the last few weeks.

“This, in the view of members, reflects the impact of the bank’s recent policy actions and reforms, as well as increased transparency in the market. In addition, the committee noted the efforts of the bank in offsetting verified foreign currency obligations, an action that will greatly enhance investor confidence and attract foreign investments to Nigeria.”