Currency speculators risk losses as rising reserves, oil prices strengthen naira
If rising reserves, oil prices in the international market and foreign exchange (forex) market liquidity are sustained, the Naira may be strengthened against other currencies from now till a greater part of 2018.
The development may spell doom for currency speculators and hoarders, including politicians who may have reserved some foreign currencies for 2019 electioneering campaigns.
The Naira’s positive outlook in the short term is riding on the back of resurging reserves’ profile, now nearing $41 billion and a stable crude oil prices at the international market, now hovering around $68 and $71 per barrel.
It is also riding on the sustained management of the forex market that has reduced the country’s import bill to $1.5 billion monthly from a record high of $5.5 billion as at February 2017.
Besides, the near convergence of the Inter-bank; licensed bureau de change and roadside hawkers (black market), is raising new hopes of further appreciation of the Naira, with more forex supply from both official and autonomous sources.
Following the development, financial experts have said it was risky for anyone to hold on to the dollar for speculative reasons, as economic fundamentals were in strong support of the Naira, irrespective of outstanding macro challenges.
While an economist at Caleb University, Prof. Segun Ajibola, is concerned with sustainability of the positive outlook for the Naira, he admitted that the local unit is riding on a cheery path.
“We must rise to the point of strengthening our local currency independent of oil considerations. What if there are challenges in the Niger Delta? How much of our exports are in the reserves’ pool? These are the things that fuel speculations. For now it is good, but too early to conclude,” he said.
Chief Executive Officer, Cowry Asset Management Limited, Johnson Chukwu, said the rising positive outlook for the Naira, especially in the next six months, is a clear warning against holding dollar.
Meanwhile, the Central Bank of Nigeria (CBN), yesterday, ended transactions at the inter-bank forex market with the auction of $210 million.
It had intervened last week in the Retail Secondary Market Intervention Sales (SMIS) with $210 million, to cater for requests in the airlines, agriculture, petroleum, raw materials and machinery sectors.