After its appreciation last week, the value of the naira began the week on a depreciating note as currency traders urged the Central Bank of Nigeria to keep the momentum, saying speculators may resist the appreciation of the naira.
Finance experts have attributed the recent surge in the value of Naira against dollar in recent times to improved market confidence following the successful launch and implementation of the new Electronic Foreign Exchange Matching System (EFEMS) on December 2 by the Central Bank of Nigeria (CBN).
The value of the naira which closed last week’s trading on a positive note at N1,591 and N1,535 to the dollar at the parallel market and the official window, closed on Monday at N1,630 and N1,538.5 respectively, taking back some of its gains.
Speaking on the naira, President of the Association of Bureau de Change Operators in Nigeria (ABCON) Aminu Gwadabe, noted that having suffered some loss, currency speculators might resist the appreciation in the value of the naira “to cover their losses.”
Aside from yesterday when the Naira lost some steam as a result of market speculators, the nation’s currency strengthened on the average last week.
The value of the naira which had closed last week trading on a positive note at N1,591 and N1,535 to the dollar at the parallel market and the official window closed on Monday at N1,630 and N1,538.5 respectively, taking back some of its gains. However, market observers said, yesterday’s development cannot erase the positives of the increasing Naira gain.
On his part, the managing director, Afrinvest West Africa Limited, Ike Chioke said the recovery could be attributed to improved market confidence, adding that, “Also, the liquidity supply boost provided by Nigeria’s successful pricing of $2.2 billion in Eurobonds earlier last week significantly boosted the exchange rate position against the dollar. We anticipate the Naira to regain more ground against the dollar this week, driven by aforementioned factors.”
Chioke listed other key policies of the apex bank that supported the naira rally as the clearance of the $7 billion FX backlog and resumed sales of Open Market Operation (OMO) bills to Foreign Portfolio Investors (FPIs) at market reflective rates.
He said: “Besides, the CBN Removed limits on rates quoted by International Money Transfer Operators (IMTOs) to incentives using the official channel for FX settlement. Eliminated the N2 billion ceiling on allowable interest-bearing deposits by DMBs at the Standing Deposit Facility (SDF) window.
The apex bank also committed the Nigeria National Petroleum Corporation Limited (NNPCL) to domicile a significant portion of revenue flows and other banking services with the CBN to enhance reserves accretion”.
Similarly, a Lagos-based entrepreneur, Michael Adigun, said the stability in exchange rate has already started to have a positive impact on the prices of goods and services. “For instance the price for international school fees has dropped by 10 per cent; cost of medical tourism has reduced by 15 per cent and prices of air fares for local and international trips dipped by 15 per cent”.
Another Abuja-based civil servant, Stevens Okoye said: “The current developments in the foreign exchange market has started reigning in inflation as prices of most necessities are becoming relatively lower in the market.”
“In a most serious note, the positive impacts include also heightening the confidence of the public in the local currency as it eliminates currency substitution behavior which hitherto being adding pressure on our local currency”.
Okoye said what is needed is to continually support the CBN policies, to further attract more benefits to businesses and the economy.
Meanwhile, the president of the Association of Bureau de Change Operators in Nigeria (ABCON) Aminu Gwadabe, noted that, having suffered some loss, currency speculators might resist the appreciation in the value of the naira “to cover their losses.
Noting the drop in demand, he said: “Market is dull. Demand is very weak and supply is very huge. The development in the market calls for circumspection. Already, there is a huge loss on speculators and currency substitutions.
“I can see speculators resisting the appreciation to cover their losses and the CBN needs to keep the momentum on ensuring hopes. Sometimes I wonder if the inorganic appreciation of the naira falls within the CBN template.”
Urging the CBN to sustain the supply momentum in order to discourage speculations and currency substitution, he said “the CBN has enough liquidity to fight and control the market considering a lot of all inflows sources coming into the market.
“The EFEMS market should not be using aggregators for exchange rates, instead, all players should post their buying and selling rates to the public. It should be access to online real time not limited to only the existing players.”
Calling on the apex bank to involve BDCs more, Gwadabe said the EFEMS market “should be democratised, opened and accountable to the public. Their new exchange rate platform only aggregates.
“The CBN should encourage our online real-time where various players will post their offer and bid rates. The kick-off of trading activities at EFEMS PLATFORM has ushered in transparency and enhanced regulatory oversight. We are expressing our commitment to continuing naira appreciation as it positively impacts not only our business operations but to the Nigerian economy in general.
“There are huge supplies into the market from various market participants as there is the fear of the unknown with the take-off of the EFEMS PLATFORM. We observed huge volumes of dollar supplies in the market.
“Also, the non-availability of naira cash is constraining naira dollar substitution. Above all, the increasing confidence of the public and operators in the CBN monetary policies is also contributing to the positive fortune of the local currency,” he pointed out.
