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Home Economy

Naira to strengthen on CBN directive on dollar sales

metro by metro
October 31, 2016
in Economy
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The nation’ currency is expected to reverse it losses this week following the directive from the Central Bank Nigeria (CBN) that First Bank of Nigeria should concentrate it solar sales to Bureau DeChange (BDCs) in other zones outside Lagos.
This is further supported by $21 million purchase by BDCs from Travelex, a global currency dealer.
However, some analyst are of the view that in spite of the anticipated dollar sales by the authorized dealers, naira would be pressured at the alternative market.
the Naira remained relatively stable against the dollar at the interbank with Naira/Dollar exchange rate slightly appreciating to N304.50/US$1.00 at the end of last week (from N304.75/US$1.00 in previous week) while the CBN continued to intervene with dollar supply in some trading sessions last week.
However, FX rate remained volatile in the parallel market, due to the restrictions on use of naira debit cards for FX transactions as well as Travelex’s inability to conveniently fulfil all USD demands. Consequently, the Naira/Dollar exchange rate at the parallel market opened the week at N455.00/US$1.00
but depreciated to N470.00/US$1.00 by midweek before firming up slightly to N465.00/US$1.00 on Friday.
A report by Afrinvest Securities limited revealed that in the futures market, the Central Bank settled $270.6m in notional value of the maturing OCT 26 2016 futures instrument on Wednesday. As with the trend since introduction of the futures market, the Apex Bank issued a new 12-month tenor instrument (OCT 25 2017) worth US$1.00bn at N258.50/US$1.00 to replace the maturing instrument.
“we anticipate continued pressure in the alternative markets despite directive from the apex bank for the commencement of dollars sales to end users”, analysts at Cowry Asset Management limited said.
Robert Omotunde, head, investment research, Afrinvest, said “we expect the exchange rate at the parallel market to remain pressured due to restricted access to official windows and surge in dollar demand associated with the festive season. The CBN is yet to guide to a metric that would trigger a shift from its current peg; thus, we expect FX rate at the official market to remain stable whilst the CBN continues to intervene via spot/forward sales of the Greenback”.
The money market last week opened with aggregate financial system liquidity in a deficit of N19.4bn. However, OBB and O/N rates inched 4.0% and 3.8%points lower to close at 10.0% and 10.8% respectively on the back of the inflow from September FAAC allocation which improved system liquidity level, enough to offset the impact of an OMO auction by the Apex Bank (where N120.2bn was mopped up at stop rates of 18.0% and 18.5 percent for the 185-days and 339-days instruments).

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