Naira Holds Strong on Expected FX Market Intervention
The Nigerian naira holds strong against the United States dollar on expected foreign exchange market intervention by the Central Bank of Nigeria (CBN), flooding the local deposit banks with foreign currencies.
With $37 billion in external reserves, a slew of analysts told MarketForces Africa today that the apex bank will flood local banks with foreign currencies and this will impact the market.
They also alluded that what is driving FX rates higher in the parallel market isn’t genuine foreign currencies demand by corporates or individuals but people’s self-interest and above national interest.
“Beyond capitalism, I think a large number of Nigerians have no economic nationalism or loyalty to the country…otherwise, it’s no rocket science that Naira cannot withstand a flood of unproductive funds newly brought out from hidings into FX markets”
Yesterday, the local currency trades steady at N446 to a United States dollar at the investors’ and exporters’ FX window. While CBN insists on de-recognition of the parallel market rates, the exchange rates at the segment have popped between N750 and N800.
Watching the apex bank move, black market traders told MarketForces Africa reporters that the exchange rate could stabilize after riotous trade that greeted the naira note redesign subsided.
CBN has initially maintained a position that the apex bank will meet the genuine needs of local bank customers but Nigerians have found loopholes to explore in the policy.
Earlier in the week, the naira tumbled to a record low of N780 per dollar on the black market due to reactional demand for the United States dollar and other primary currencies – Sterling, Euro and Japanese yen, and Yuan.
Criminal elements in Nigeria and politicians that had previously hoarded the local currency brought large funds out from their private vaults in exchange for foreign currencies as CBN announced the deadline for old currency notes to be taken to local banks.
FX traders and other Broadstreet analysts believe the naira redesign has spurred dollar purchases by individuals on the black market, where the currency is freely traded – albeit – unregulated. # Naira Holds Strong on Expected FX Market Intervention