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Naira gains as traders expect sustainable appreciation

The Naira, on Thursday gained a total of five points to close at 380 to the dollar, compared to 385 it sold on Wednesday at the parallel market.

The local currency, also appreciated against Pound Sterling at 485, against 490 sold on the previous day, while Euro remained unchanged at 420 at the unofficial market.

It, however, was steady at the interbank market where it was quoted at 305.45 the same rate it has been trading since Tuesday, but better than 305.60 sold on the first trading day of the week.

At the Bureau De Change (BDC) window, the Naira was sold at N362 to the Dollar, while the Pound Sterling and the Euro closed at N495 and N423.

The naira also strengthened further at the Investor and Export window, with an opening rate of 382 against 382.69 earlier in the week and closed at 383.11 an improved rate compared to 383.17it closed within the week.

Consequently, foreign exchange dealers believed that the naira is seen trading within a narrow range on the back of central bank injection of dollars to improve liquidity and narrow the spread between official and black market rate.

The local currency, was quoted at 382 per dollar at the investor’s window where they could trade foreign exchange at rates set by buyers and sellers, according to the market regulator FMDQ OTC Securities Exchange.

A senior currency trader quoted as saying: “We see naira trading within the prevailing rate as the central bank sustains its dollar sales in the coming week.”

It would be recalled that the CBN had injected $457.3 million into various segments of the forex market earlier in the week, making the local currency on Tuesday appreciated to 383 to US dollar, against 386 traded on Monday at the parallel market.

The CBN Spokesman, Mr. Isaac Okorafor in a statement in Abuja, said that both the spot and forwards segments garnered 267.3 million dollars, while the wholesale segment got 100 million dollars.

Okorafor said the Small and Medium Enterprises (SMEs) and Invisibles segments comprising basic travel allowance, tuition fee and medical got 50 million dollars and 40 million dollars respectively.

However, checks on the volume of trading on the Investors and Exporters foreign exchange window in the past three weeks on the FMDQ platform revealed that 600 million dollars had been sold by both the CBN and autonomous sources.

Meanwhile, despite the continuous forex intervention by the apex lender, the nation’s external reserves still stood at $ 30.72 billion but against $30.99 billion on May 4, 2017, which moved to $30.78 billion on May 15, 2017, the latest figure on the CBN’s website has shown.

For the days under review, the nation’s foreign reserves almost crossed the $30 billion mark to $31 billion on May 4, 2017, following increased inflow from Oil revenue, among others. Finance experts had attributed the decline to recent windows introduced by CBN, stressing that foreign reserves might deep further in coming days.

The CBN last month opened a new special foreign exchange window dedicated to investors, exporters and end users.

In a circular titled Establishment of Investors and Exporters Window, the CBN claimed this new window was introduced to boost liquidity in the foreign exchange market and ensure timely execution and settlement of eligible transactions.
CBN in the same month unfolded yet another policy measure, stating that it has opened a special foreign window for small and medium scale enterprises (SMEs).
The CBN on Monday injected $457.3 million into various segments of the foreign exchange market on Monday.
Commenting on this development, Managing Director, Cowry Asset Management Limited, Mr. Johnson Chukwu, said it is as a result of recent intervention by the CBN.
He said, “You have heard that CBN has opened a number of foreign exchange windows. There have been a number of interventions such as the retail and wholesale windows.
“The CBN opened a window for exporters and investors and meeting these demands would certainly have exerted pressure on the demands. It is basically because of the help the CBN is doing,” he said.
When asked if the situation may persist, he said “It depends. I think the CBN will manage it. They would not allow the reserve to dip materially.”
According to him, a way to sustain the foreign reserves is to liberalise the market and have a continuous improvement in the foreign exchange policy.
He said, “There should be continuous improvement in the Foreign Exchange policy. If you cast your mind back to 2005, foreign inflow was about $20 billion in terms of capital importation and foreign portfolio.

 

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