The naira has strengthened further across the foreign exchange (forex) markets amid expectations that the national currency will continue to gain weight in the period ahead.
At the Nigerian Autonomous Foreign Exchange (NAFEM), the
naira appreciated by 9.5 per cent to close weekend at N1,142.38 per dollar. At
the parallel market, naira inched up by 0.4 per cent to close at N1,230 per
dollar.
At the forwards market, contracts appreciated, underlining
the confidence in the stability of the national currency in the meantime. The
on-month contract gained 5.4 per cent to close at N1,212.79 per dollar,
three-month forwards rose by 4.3 per cent to N1,248.89 per dollar while the
six-month and one-year contracts appreciated by 4.2 per cent and 5.3 per cent
to N1,304.74 per dollar and N1,404.46 per dollar.
Daily average turnover at NAFEM dropped by 44.2 per cent to
$374.1 million, with trades consummated within the N1,200 and N1,261 per dollar
band.
Meanwhile, Nigeria’s forex reserves remained flat at $33.36
billion.
Afrinvest West Africa stated that it expected the naira
“would continue to strengthen as the CBN intensifies efforts to bolster
liquidity in the market”.
Cordros Capital Group said the apex bank has strategically
intervened in the forex market to guide market direction and strengthen
confidence.
“This intervention, along with improved forex liquidity, has
led to the recent appreciation of the naira. Looking ahead, barring any shock,
the naira is expected to remain stable, supported by improved forex liquidity
conditions due to sustained inflows from foreign portfolio investments (FPIs)
and reduced speculation activities,” Cordros Capital Group stated.
Analysts at Financial Derivatives Company (FDC) had earlier
said they expected the naira to remain stable in the meantime, given the
monetary stance of the CBN.
Managing Director, Financial Derivatives Company (FDC), Mr.
Bismarck Rewane, said the monetary stance suggests further stability in naira
and increase investors’ confidence in the economy.
He noted that the high interest rate is expected to support
investment inflows from portfolio investors, which combined with a quadruple in
remittance inflows and rebounding oil and non-oil export earnings, will support
external reserves, aiding the CBN’s intervention efforts at the official
window.
“Essentially, the naira’s stability will continue amid
higher interest rates,” Rewane stated at the weekend.
He said while it may still take some short time for exchange
rate gains to translate to reduced commodity prices in the open markets, “the
future holds bright promises”.
Governor, Central Bank of Nigeria (CBN), Dr Olayemi Cardoso,
has outlined that ongoing efforts to strengthen the country’s forex position
would lead to increased stability in forex reserves and naira.
According to him, the collaboration with Ministry of Finance
and the NNPCL to ensure that all forex inflows are returned to the CBN will
greatly enhance forex flows and contribute to the accretion of reserves.
“The expected stability in the foreign exchange market for
2024 can be attributed to the reduction in petroleum product imports and the
recent implementation of a market-determined exchange rate policy by the CBN.
This reform is designed to streamline and unify multiple exchange rates,
fostering transparency and reducing opportunities for arbitrage. The resulting
consistent and stable exchange rate will not only boost investor confidence but
also attract foreign investment, elevating Nigeria’s appeal to global
investors.
“We are implementing a comprehensive strategy to improve
liquidity in our forex markets in the short, medium, and long term. Our focus
is on addressing fundamental issues that have hindered the effective operation
of our markets over the years,” Cardoso said.
He pointed out that the apex bank understands that upholding
the integrity of financial markets is crucial for building confidence, thus it
remains committed to decisively address any infractions and abuses.
He noted that in efforts to stabilise the exchange rate, the
CBN prioritises transparency and a market environment that enables the fair
determination of exchange rates, ensuring stability for businesses and
individuals alike.
“We believe that the naira is currently undervalued and,
coupled with coordinated measures on the fiscal side, we will expedite genuine
price discovery in the near term. This coordinated approach will contribute to
a more balanced and stable exchange rate,” Cardoso said.
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