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CBN sterilises another N72b, interbank rates

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Naira depreciation

Naira depreciation

Naira goes for N412 at parallel market, loses N15 in three days

The money market observed the weekend with less liquidity in circulation as the apex bank sustained its efforts to support naira exchange rate by N71.6 billion mop-up exercise.

The action, executed through the treasury bills auction of 195-day instrument, also gave the holders an 18 per cent interest.
Meanwhile, the interbank lending instruments- Open Buy Back (OBB) and Overnight RATES remained high, at 18.17 per cent and 20 per cent respectively, but lower than last week’s record.

Besides, the instruments have traded at that range all week, as low liquidity and the persistent cash withdrawal through treasury bills sales by the regulator continued.

But the optimism among traders has rebounded over tapered interbank rates this week, as signal for the disbursement of July’s budgetary allocation to agencies of government is strong.

“Hopefully, the financial system will get the July allocations as the weekly activity resumes. That will help to moderate the interbank lending rates, which has been high. This will only last if there is no big intervention from the regulators again,” a forex trader said.

The Naira on Friday continued its free fall at the parallel market to N412 per dollar, while on some other areas of Lagos, it went for N410 per dollar.

However, exchange rate firmed up at N314.95 per dollar at the interbank market at the close of trading, a more than N1 gain when compared with N316.57/$ it closed on Thursday.

The three-day pressure, which some money changers have attributed to difficulty in accessing forex from the banned banks, tightened dollar supply.

On Thursday, the naira closed at 409 per dollar on the parallel market. On the interbank market it traded at 315 compared with 305 the previous day.

Nigeria depends on the sale of crude oil to get about 70 percent of national revenue and 90 per cent of its foreign exchange, but hit hard by volatility in global crude prices for more than 24 months.

The Naira on Thursday, continued the renewed free fall at the parallel market to N409 per dollar, while on some other areas of Lagos, it went for N407 per dollar.

However, exchange rate remained positive at N316.57 per dollar at the interbank market Thursday, a marginal loss when compared with N315.93/$ it closed on Wednesday.

On Wednesday, it reached a record low of N402, as ensuing crisis over the ban of nine banks on the foreign exchange market gained momentum.

In what looked like a staged protest, the remaining banks were visibly absent at the interbank market, with activities almost grinding to a halt, as only $750,000 were exchanged in three deals on Wednesday.

Findings showed that sentiments are now driving the exchange rates over the ongoing impasse between banks and the regulator as increased demand for the dollar that are not matched with supply and few lenders in the market aggravate price bargain.

“The suspension of some banks from transaction in the forex market has really increased pressure on the market,” the President of bureau de change operators, Aminu Gwadabe, said.

But another trader said that the market will get over the initial sentiment, even if the suspension lasts more than expected, because the regulator will find a way of funding the market.

The naira had earlier in the month touched N400 per dollar at the roadside market and strengthened to between N393 and N397.


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1 Comment
  • Information Analyst

    Lets start by changing our currency to a different value. For example,
    CBN can print a new 50 kobo note and equate it to the old 1 Naira note.
    By this we are simply revaluing our currency. People with the old notes
    hidden in farms or elsewhere will be made to bring them out. People’s
    money in bank accounts can equally be revalued accordingly. If you have
    N1m, it will now worth N500,000. When OBJ was the president, Charles
    Soludo, former CBN governor once proposed this method but, some powerful
    interests in the country stopped the plan from being achieved. This
    kind of Naira revaluation will remove the pressure off the dollar, at
    least for a time being, thereby allowing the government time to
    reposition our economy without much distraction.

    Take Ghana For example…

    Tuesday, July 3, 2007.
    New
    currency notes are being introduced in Ghana today. The new currency, to
    be called the Ghanaian cedi, replaces the previous cedi which has been
    in circulation since 17 February, 1967. The Ghanaian cedi will be
    exchanged at 10,000 old cedis to one (1) new Ghanaian cedi.