Naira Swings as Monetary Authority Suspends Meeting
The Nigerian naira appreciated to N750.14 at the official window on Monday, setting a new price action for the day from a pattern witnessed in the past week. Details from the forex market showed that the exchange rate has always been negative at the beginning of the week due to carryover from the logged forex demand.
However, the exchange rate at the black market worsened as the apex bank policy committee hinted about not holding a policy committee meeting in November 2023. Data from the FMDQ OTC FX platform showed that the Naira appreciated by 5.26% in the official market, closing at N750.14 to the US dollar compared to the previous rate of N791.75.
What markets have learned in 2023 was that a tight forex supply amidst increasing shock could do a lot of damage to the Nigerian naira. Also, a devaluation of the local currency could be all that speculators require to get a higher FX spread.
The damage done by lowering the value of the local currency has continued to support inflation pressure. This caused the Central Bank to lose on both sides of currency management and maintaining price stability.
All policy efforts have been a game of zero-sum. The fact that the FX inflow challenge has persisted without clear-cut policy efforts signals a need for industrial policy redesign for Africa’s largest economy.
This also emphasises the fact that no economic agent can control the demand and supply side at the same time. The Nigerian government has been controlling borrowing rates, offering negative interest yield on assets.
On their part, foreign investors who usually flock to the economy have kept their funds away despite multi-faceted economic reforms – which are still ongoing. In the parallel market, the Naira depreciated by 0.26% to close at N1,138 per US dollar amidst a fresh rally in the commodities market.
ICE Brent crude advanced by 1.97% to $82.2 per barrel, while the West Texas Intermediate (WTI) crude oil also increased by 1.79% to $77.4 per barrel. Nigeria US Dollar Bond Yield Climbs as FPIs Dump Assets
The Central Bank of Nigeria has again postponed its monetary policy committee, a report by Bloomberg on Monday which quoted the CBN’s Director of Corporate Communications, Dr Isa Abdulmumin, said, “MPC is not holding” a meeting this week in a text message response.