CBN Adjusts Rate As Naira Falls To 244

CBN Adjusts Rate As Naira Falls To 244

The Central Bank of Nigeria on Thursday adjusted its exchange rate peg to N197 against the United States’ dollar from the N196.95 it set last week, data on the bank’s website showed.

This came on the heels of a further decline in naira to 243 against the
dollar at the parallel market on Thursday.

The persistent decline of the naira in the parallel market followed the
introduction of new measures by the central bank last month,
restricting access to hard currency at the interbank in a bid to
conserve dwindling foreign exchange reserves.

The forex rate adjustment on Thursday was the fifth since the CBN
introduced tight controls on the forex market in February, Reuters
reported.

The bank said at the time that it would sell dollars only at N198 to
customers through the interbank based on direct orders by banks.

The naira traded at 199.50 to the dollar on the interbank market on
Thursday, compared to the 197 per dollar rate at which it closed on
Wednesday.

Forex dealers said the outcome of the Monetary Policy Committee
meeting of the CBN due on Friday (today) could affect the naira.

“We are very optimistic that the central bank would come out with
some measures to support the naira at the end of its MPC meeting on
Friday,” the Acting President, Association of Bureau De Change
Operators, Alhaji Aminu Gwadabe, told our correspondent.

He also said the association had met with the CBN in Abuja on
Thursday to discuss the need to reverse the recent policy requesting
BDCs to collect prospective customers’ Bank Verification Number
before selling forex to them.

A Reuters poll showed the bank could hold interest rates for now.

The Head, Investment Research, Afrinvest West Africa, a research and
investment advisory firm, Mr. Ayodeji Ebo, and his team, predicted that
the MPC would take some key decisions at the meeting.

In its report on the MPC meeting, the team said, “We imagine the MPC
will favour one of the following possible scenarios: Leave all policy
rates unchanged and continue to adopt administrative measures to
curb naira volatility while rebuilding external reserves; or increase the
naira intervention rate in the interbank market and raise cash reserve
requirements to 35 per cent to reduce naira liquidity that could spur
FX speculation; or increase monetary policy rate by 50bps to attract
foreign portfolio investment, while subsequently loosening restrictions on FX trading.

“We place a 70 per cent probability on scenario one, 20 per cent
probability on scenario two and 10 per cent on the third scenario.”

Agency report