•CBN must find sustainable solutions –Experts
By Chinwendu Obienyi
Owing to moderate demands for foreign exchange on resumption of transactions on Monday, the exchange rate between the naira and the dollar stood between N1,350-N1,380/$1 at the parallel market across the country.
This, according to BDC operators who spoke to Daily Sun, came as a result of demand surge which moderated after the early hours of trading at the parallel market.
The dollar had stayed at N1,450/$1, month-to-date high following the sale of FX by the Central Bank of Nigeria (CBN) to BDC operators. However, fortune in the naira took a new path as the Economic and Financial Crimes Commission (EFCC) launched a crackdown against currency traders as well as online platforms, whilst accusing them of manipulating the value of the naira.
As such, the naira at the official market, depreciated by 12.6 per cent to close the weekend at N1,339.23/$1 even as the CBN sold $80 million to banks within the range of N1,100-N1,150/$1. Similarly, the naira depreciated by 11.2 per cent at the parallel market to settle at N1,290/$1, hence, this means that the dollar sale surge has increased by 6.97 per cent.
Furthermore, the naira depreciated by 5.6 per cent to close at N1,419.11/$1 at the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Monday.
It will be recalled that total turnover at the NAFEM (as of 25 April) decreased by 37.5 per cent WTD to $893.56 million, as trades were consummated within the N1,000.00 – N1,435.00/$1 band.
In the Forwards market, the naira rates depreciated across the 1-month (-13.3 per cent to N1,351.53/$1), 3-month (-13.1 per cent to N1,393.75/$1), 6-month (-11.9 per cent to N1,444.89/$1) and 1-year (-10.8 per cent to N1,577.43/$1) contracts.
Reacting to the development, analysts stated that the pressures in the FX market have continued despite CBN’s interventions due to the sustained exit of FPIs from the domestic capital market, given the lingering external concerns such as the heightened geopolitical tension.
They added that there has been a relaxation in CBN’s monetary tightening, as yields on naira-denominated assets appear to have plateaued, and stated that the apex bank needs to fix the supply side of FX.
Partner, SPM Professionals and Chief Economist, Paul Alaje, said, “Economics is not common sense, if you think it is, then common sense is not common. If we must see a substantial and sustainable difference, then we must fix the supply side and find sustainable solutions”.
For their part, analysts at Cordros Capital, said, “Looking ahead, we anticipate continued pressure on the naira, given CBN’s constrained FX reserves and limited FPI inflows”.