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Nairaland Forum / Nairaland / General / Business / Naira Gains On Dollar [continues 4days Winning Streak. N480/$] (361 Views)
Naira Gains On Better Than Expected Economic Growth / Naira Gains On Fresh Dollar Supply, Now 390/dollar / Naira Gains On Parallel Market For Four Consecutive Days, Now N480/$ (2) (3) (4)
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Naira Gains On Dollar [continues 4days Winning Streak. N480/$] by TheBlessedMAN: 7:32am On Feb 25, 2017 |
The naira continued on its four-
day winning streak against the
U.S. dollar on the parallel market
yesterday to close at N480/$,
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. |
Re: Naira Gains On Dollar [continues 4days Winning Streak. N480/$] by madridguy(m): 7:33am On Feb 25, 2017 |
Ok |
Re: Naira Gains On Dollar [continues 4days Winning Streak. N480/$] by TheBlessedMAN: 7:33am On Feb 25, 2017 |
Source.. This Day Newspaper |
(1) (Reply)
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