Naira is gaining strength at the parallel market. It appreciated at the weekend from 525 naira per dollar to 505 naira per dollar. The strength followed news of the expected $6.35 billion liquidity flow into Nigeria.
The local currency fell sharply at the parallel market after the Central Bank of Nigeria (CBN) announced the stoppage of dollar sales to Bureau de Change (BDC) operators.
Elsewhere in Calabar, the Cross River State capital, CBN Governor Godwin Emefiele said the apex bank has projected in its Policy Thrust plans to achieve a double-digit economic growth and a single-digit inflation rate by 2024.
Analysts said naira’s rebound followed the expected $3.35 billion inflows from the International Monetary Fund (IMF’s) $650 billion Special Drawing Rights (SDRs) and Eurobond issue of $3 billion by the Debt Management Office (DMO) from the International Capital Market (ICM).
The Eurobond issue will be handled by JP Morgan, Citigroup Global Markets Limited; Joint Lead Managers, Chapel Hill Denham Advisory Services among other book runners.
The IMF Board of Governors approved a general allocation of SDRs equivalent to $650 billion to boost global liquidity.
Nigeria was billed to receive $3.35 billion out of the $650 billion on August 3 – when the SDRs would have been to IMF member countries in proportion to their existing quotas in the Fund.
IMF Managing Director Kristalina Georgieva described the move as historic – the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis.
Georgieva said in a statement on the IMF website, said: “The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence, and foster te resilience and stability of the global economy. It will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 crisis.”
Financial Derivatives Company Limited Managing Director Bismarck Rewane predicted that the naira will gravitate towards fair value – N470/$ to N490/$ in the coming months provided dollar supply increases and crawling peg is adopted.
Rewane said: ”Naira will stabilise as SDR facility and Eurobond is drawn down while exchange rate stability expected in third quarter of 2021 improved dollar cash flow.”
Also last month, the foreign reserves also gained $80 million (0.24 per cent rise) to close at $33.4 billion.
According to Rewane, naira premium on parallel market rate will reduce as forex becomes more accessible to the public through the forex desks created in commercial banks.
He described the rise in oil prices – hovering around $75 per barrel (pb) in July and raise in Nigeria’s production quota to 1.8 million barrel per day (mbpd) by the Organisation of Petroleum Exporting Country (OPEC) as bright spots in the picture.
To him, this could lift the quarterly dollar oil revenue towards $14 billion per quarter from an average of $11 billion in 2020.
Nigeria’s terms of trade, which measures the change in prices of its exports relative to the prices of its imports has improved from 23.2 in 2020 to 30 in 2021.
“This means that with the balance of trade now becoming positive ($1.2 billion) and an exchange rate determining mechanism aimed at attaining global competitiveness, there is a chance that Nigeria might be moving gradually and closer towards fair value of the naira on a more sustainable basis,” he said.
Rewane said that the naira has gained 3.24 per cent since it fell to N525/$ last week adding that most pessimists were of the view that the naira was likely to plunge to N700/$ after the BDCs were stopped from buying dollars from the CBN.
“We continue to hold the view that the naira will continue to appreciate towards fair value (N470-N490/$) in the parallel market as long as the CBN increases forex supply,” Rewane said.
Forex Trading Desk Manager, AZA, Murega Mungai, said that market panic after the CBN guidelines dollars sales to BDCs has reversed, with most speculators cutting their negative positions, reversing losses on the currency.
Mugai said: “The restrictions are a relief to some who accuse the BDCs of hoarding dollars and creating artificial shortages, with the CBN effectively directing banks to make more foreign currency available. The Naira maintained N411.5 to the dollar in official rates during the week. With panic buying off, we project the naira to further strengthen in the coming days.”
Emefiele, who at a one-day interactive and enlightenment session with the organised Labour and representatives of the Civil Society Ogarnisations (CSOs), told labour leaders that various interventions introduced by the CBN to grow the economy and stabilise the financial system.
Represented by the bank’s Acting Director, Corporate Communications, Mr. Osita Nwanisobi, the apex bank chief said the double-digit economic growth before or by 2024 looked herculean because of the prevailing parameters.
He, however, restated that bank’s determination to achieve the feat with the support of Nigerians.
Quoted some economic statistics, Emefiele said: “As at last year; in the second quarter the growth was -6.10%, third quarter it was -3.4% but by the fourth quarter, we returned to a positive territory, having a 0.1% growth that was fragile still.
“By the first quarter of 2021, we maintained a 0.5% growth which was still very fragile. But the vision is still evergreen. The vision is a People-Centered CBN that will grow the economy through the people and with the people.”
Besides the push for a double-digit economic growth, he said the CBN was also pursuing a single-digit inflation rate.
The CBN governor said: “This is another tall dream because since the advent of the COVID-19 pandemic, inflation has not stopped. In February this year, inflation rate was about 17.8%, in March it was moved to 18.2% and in April, it started to decelerate. By May it was 17.9% and in June, it was further reduced to 17.7%.”
One of the resource persons, Dr. Zef Chinedu, decried Nigerian’s apathy, especially from the Southsouth and Southeast, to Federal Government’s intervention programmes.
He said: “There is no favouritism in any of the federal Government intervention programmes through the CBN.”
Saying that not all who apply for credit facilities will get,Chinedu advised that people must first apply.
He said: “Don’t think that you need to know anybody. Many households and Small and Medium Enterprises in Nigeria have gotten the COVID-19 pandemic intervention funds, either the Grants or the Loans which is at interest rate that is as low as 5 per cent
“Over 6000 members of the NLC (Nigeria Labour Congress) and the TUC (Trade Union Congress) across the country have so far benefited from some of the CBN targeted intervention programmes.”
(The NATION)
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