The naira continued on its four-day
winning streak against the U.S. dollar on the parallel market yesterday to
close at N480/$, stronger than the N501 to the dollar from the previous day, as
the new foreign exchange policy actions introduced by the Central Bank of
Nigeria (CBN) forced more currency speculators to sell off the greenback as
sell rates fell as low as N460/$.
The buy rate of the dollar also
strengthened yesterday to close N470/$, as against the N490/$1 at which it
closed on Wednesday.
In all, the naira has appreciated by
N39 since Monday when the new FX actions were announced by the regulator.
Also, as part of efforts to sustain
dollar liquidity in the market and bridge the gap between the interbank FX and
parallel markets, it was gathered that the central bank auctioned another $230
million through forward contracts on the interbank FX market yesterday.
It auctioned $370 million on Tuesday
and sold $1.5 million on the spot market.
Commenting on the new FX measures,
analysts at Cowry Assets Management Limited said the move by the CBN to
increase FX availability to end users has been helped by the recent buildup of
Nigeria’s foreign exchange reserves amid increased crude oil revenues.
“Given the improvement in the
external sector, we anticipate that the new measures could pave the way for a
gradual return of confidence in the foreign exchange market.
“We also expect the monetary authority
to do more to harmonise the exchange rates and thereby discourage arbitraging,”
they added.
In the same vein, Ecobank Nigeria
noted that the new policy actions would also help to reinvigorate the hitherto
illiquid interbank FX market.
According to Ecobank, the decision
to cap the settled rate for the retail transactions at 20 per cent above the
interbank market rate and the restriction of school fees to university
education only was a subtle way of partly controlling bank charges and manage
likely FX demand pressure in the market.
The bank added: “Over all, the
impact of the circular could be short-lived, if the CBN does not show strong
capacity to support the FX market with liquidity.”
Also, Cyprus-based FXTM Research
Analyst, Lukman Otunuga noted that with dollar demand for school fees payments
overseas and personal travel allowance enforcing downside pressures on the
parallel market, the move by the CBN to sell dollars to retail users via
commercial lenders was logical.
“While the policy may create some
transparency, liquidity and efficiency in the Nigerian FX markets, this does
not solve the overriding problem of multiple exchanges.
“Eventually, the CBN may be forced
to bridge the disparity between the official and parallel markets which have added
to Nigeria’s woes.
“With expectations heightened over
the central bank devaluing the local currency in an effort to create liquidity
and stability, this new policy could be viewed as the first course.
“It must also be kept in mind that
the inexhaustible demand for the dollar, that is not the legal tender in
Nigeria, continues to leave the naira vulnerable to heavy losses,” he added.
Financial Derivatives Company (FDC)
Limited also warned in a note that “Nigerians must remember that this recovery
is only as good as the supply remaining consistent”.
“The good news is that oil is
currently trading at $57pb. If sustained, this will provide the buffer needed
to support the CBN’s policy directive of substantial weekly dollar injections
into the market,” FDC said.
Meanwhile, the Special Adviser to
the CBN governor, Financial Markets, Mr. Emmanuel Ukeje has said manufacturers
could end up benefiting from other funding sources provided by the central bank
that may exceed the 60 per cent preferential FX allocation to them, which was
stopped last Monday when the new FX policy actions were announced.
Ukeje’s assurance to the
manufacturing sector came against the backdrop of complaints by industries.
He said contrary to speculations
that the CBN may have relegated the manufacturing sector, the central bank
still holds the sector in high esteem.
Speaking on Arise News Network, the
broadcast arm of THISDAY Newspapers, he said the CBN has developed a strategy
of ensuring that funding gets to the manufacturing sector.
“There are other avenues that they
will end up benefiting more than the 60 per cent they were getting from those
allocations,” he said.
According to him, “Even though
manufacturers were given that preference in the past, manufacturers under any
condition are still part and parcel of bank customers.
“And that’s what the CBN is going to
fall back on, as we feed other sectors for other people to access the funds.
The manufacturing sector actually will benefit from other interventions by the
CBN because we also hold this particular sector in very high esteem.
“We know the role they are supposed
to play in terms of contributing to the economic development of the country.”
Despite its decision to stop the
preferential treatment, which required banks to allocate 60 per cent of FX
purchases from all sources to specific sectors of the economy, the central bank
had maintained that the provision of FX to the manufacturing sector would
remain its strong priority.
But since the announcement, there
have been diverse interpretations of the central bank’s pronouncement, with
some manufacturers raising concern.
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