Naira Remains Stable across Markets as CBN halt intervention
Naira remained stable across market though the apex bank halted its weekly intervention.
However, the Central Bank of Nigeria’s decision not to intervene in the FX market was greeted with bash from analysts, as some noted that the apex bank now seems to lack independence usually credited to the monetary policy authority.
In what appears as undermining the independence of the institution, the President during the week directed the CBN to restrict foreign exchange access to food importers claiming Nigeria is now self-sufficient, Afrinvest noted in its note.
The firm stated that whilst there have been no official comments from the CBN on this development; it is unclear if the directive will be complied by the apex bank.
Surprisingly, the apex bank did not also conduct its weekly foreign exchange intervention sales as the foreign reserves declined by US$161.7 million to settle at US$44.5 billion.
Despite this, naira was stable across segments at the close of the week.
The CBN spot rate and parallel market rate traded flat all week at N306.90/US$1.00 and N360.00/US$1.00 respectively while the NAFEX rate at the Investors and Exporter’s (I&E) FX window appreciated by 2kobo week on week to close at N363.42/US$1.00.
Activity level at the I&E window advanced by 55.7% to US$1.9 billion from US$1.2 billion recorded in the previous week.
At the FMDQ Securities Exchange FX Futures Contract market, the value of open contracts improved by US$123.1 million (1.2%) to settle at US$10.6 billion last week.
The JULY 2020 futures contract enjoyed the most buying interest during the week as investors bought additional futures worth US$18.5 million, putting the value of the contract at US$152.8 million.
On the flip side, the FEB 2020 had the least buying interest as it gained US$1.2 million to settle at US$1.3 billion.
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“Although the CBN halted its weekly intervention last week, we expect the apex bank to continue employing a managed float foreign exchange system to achieve its foreign exchange rate stability objective”, Afrinvest stated.
Naira Remains Stable across Markets as CBN halt intervention
