Foreign exchange (FX) dealers and analysts in the financial services sector have renewed their call for currency adjustment or a new forex policy from the Central Bank of Nigeria (CBN) following fresh pressure on the naira.
The FX parallel market bowed to demand pressure last week, ending weeks of stability in the currency market as the Federal Government’s decision to deregulate the downstream oil and gas sector drove rates southwards.
Parallel market rates traded at N323/$1 on Monday and Tuesday, but reacted sharply to government’s announcement on subsidy removal and petrol importation on Thursday and Friday, depreciating to N335/$, and further to N350/$ amid expectations of increased dollar demand by petroleum marketers.
However, official market rate remained at N197/$ all week while the interbank rate steadied at N199.10/$. At the Bureau-De-Change segment, the naira traded at N321/$busifrom Monday till Thursday. “We see the recent pronouncement by the NNPC as a technical endorsement of the FX parallel market rate for petroleum product importation, given the assumed N285/$ exchange rate in the pricing template. “In addition, demand by oil marketers, which constitute a huge proportion of currency market transactions is expected to pressure the unofficial market rates significantly and further widen the official vs. unofficial market spread, thus having an overall impact on prices. “Consequently, we suspect that the CBN may be forced to adjust the current peg on the official market rate or find creative way to adopt a more flexible exchange rate policy,” analysts at Afrinvest Securities Limited, said.
Analysts at Cowry Asset Management Limited said the deregulation had an opposite impact on the interbank forwards market where the NGN/USD exchange rates appreciated in favour of the naira for most dated contracts. The naira gained 0.44 percent, 1.58 percent, 3.10 percent and 1.35 percent to N200.44/$, N203.68/$, N209.09/$ and N221.14/$ for the 1 month, 3 months, 6 months and 12 months contracts, respectively.“This week, following the aforementioned developments, we expect naira to weaken further against the greenback at the alternative markets,” the analysts said.
The analysts expect moderation in lending rates this week following maturing treasury bills and expected Federation Accounts Allocation Commission (FAAC) disbursement.
This week, treasury bills worth N110.94 billion will be auctioned on Wednesday; viz: 91-day bills worth N32.44 billion; 182-day bills worth N22.82 billion, and 364-day bills worth N55.68 billion.
The Nigerian Interbank Offered Rates trended higher against the backdrop of strained financial system liquidity. The financial outflows resulted from auctions of Federal Government bonds worth N105 billion, even as additional outflows worth N30 billion in 231-day treasury bills materialised via Open Market Operations.
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