More Hope for Stronger Naira as CBN Pump Fresh $231.5m into Forex Market

The free fall of the Nigerian Naira at the parallel market has been halted and will again receive a boost as the Central Bank of Nigeria (CBN) is set to inject another fresh $231.5m into the Forex Market.

Newtelegraph reports that the Central Bank of Nigeria (CBN) yesterday auctioned $230 million in forward contracts on the official market after selling $370 million this week to boost dollar liquidity and help narrow the gap between the official and black market rates, traders said The apex bank also sold $1.5 million on the spot market to help keep interbank rates at N305.50 per dollar. On the parallel market the Naira firmed to N490/$1 after opening at N505/$1, traders said.

It will be recalled that barely 24 hours after the CBN began stepping up dollar sales in the foreign exchange market in a bid to narrow the spread with the official exchange rate, the naira on Wednesday appreciated to N505 against the dollar on the parallel market. The local currency had traded at N520/$ earlier on Monday before the Apex Bank announced it had adjusted its foreign exchange policy to improve dollar supply to retail users.

But following the regulator’s statement that it will commence special weekly dollar sales to banks who will resell to Nigerians seeking forex for school fees payment, Personal Travel Allowance (PTA), Basic Travel Allowance (BTA) and Medicals at a margin of not more than 20 per cent above the interbank rate, the Naira appreciated to N516/$ on Tuesday.

Also, the buy rate for the greenback crashed on the parallel market yesterday to below N490 to the dollar, as foreign currency speculators who had held on to the dollar for several weeks rushed to sell off the currency in the wake of renewed confidence in the CBN’s ability to meet demand on the interbank market.

The chief executive of Economic Associates Limited, Dr. Ayo Teriba, urged the central bank not to relent in its efforts to rebuild foreign reserves to at least $36 billion that can cover nine months of imports, in order to close the gap between the interbank and parallel market rates.

Also, global ratings agency, Fitch Ratings on Wednesday 22/02/2017 said the new policy actions announced by the CBN, might ease some of the severe foreign currency liquidity pressure faced by banks in the country. Fitch said that the most important aspect of the CBN’s announcement was the plan to normalise the FX interbank market.

It said in a statement that the intention of the CBN was to clear the backlog of overdue foreign currency obligations owed by banks to international creditors.

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