Naira Sustains Gains on Parallel Market, Now N535/$

Nume Ekeghe

Following improved dollar supply by the Central Bank of Nigeria (CBN) for legitimate transactions, the naira has appreciated to N535 to a dollar as of yesterday, stronger than the N560 to a dollar it was previously.
Some parallel market forex dealers told THISDAY that in recent times they have been recording reduced demand for the greenback.

Analyst predicted that the momentum would be sustained for the rest of the year and could possibly strengthen further to N520 to a dollar.
Speaking to THISDAY, Managing Director Afrinvest Research, Mr. Abiodun Keripe noted that the strength of the foreign reserves and supply of forex by the CBN played a major role in this appreciation.

“The CBN now has more firepower in forex reserves at over $40 billion and this gives the CBN ability to supply the market and clear the backlog in the system combined with the inflows from the last Eurobond sale and accretion in oil prices. I believe this is driving the appreciation in the naira,” he added.
On his part, the Head, Retail Investment, Investment Management Group, Chapel Hill Denham, Mr. Ayodeji Ebo noted that the trend could be sustained.

He said: “It will be sustainable; there was a lot of speculation which increased demand and you know, when there is speculation even when you do need to, people buy and keep.
“Looking at the forex reserves also provides a bit of confidence and provides a bit of confidence for domestic institutional investors.

“So, I feel this is sustainable. We may we may see further appreciation because we expect remittances to increase as we approach the end of the year, which will increase the supply to the economy.”
Also, Head, Financial Institutions Ratings at Agusto & Co, Mr. Ayokunle Olubunmi said: “Even in our forecasts, we see more appreciation in December because the COVID-19 restriction have been lifted and people would come into the country.”

Also speaking to THISDAY, Investment Research Analyst, United Capital Plc, Mr. Ayorinde Akinloye added: “The sudden appreciation is largely due to weak demand at this point in time. Pressure could return at the turn of the new year when people resume travels, begin to pay school fees for international schools and resumption of business activities at the start of the year. Thus, the appreciation may only last a few weeks before renewed pressure.”

CBN Governor, Mr. Godwin Emefiele had on Wednesday in Paris, disclosed that confidence in the Nigerian business environment was growing due to sustained policy interventions in the economy. Overall, Emefiele said the business confidence index was projected at 37.7 index points in November 2021 and 57.6 index points by mid-2022.
Speaking further, Emefiele pointed out that headline inflation in the country was expected to moderate to 15.35 per cent by December 2021 and 14.91 per cent by February 2022, respectively.

Similarly, he anticipated that core inflation would fall to 13.39 percent in December 2021 from 13.74 per cent in October 2021. “This is due to the favourable impact of the various CBN and government interventions in the agriculture and the real sector, the moderation of supply side constraints and the gradual increase in domestic economic activity, which is expected to keep prices low in the near-term,” Emefiele told his audience.

He estimated that Nigeria’s external reserves would surpass $42 billion by mid-2022. This, according to the CBN Governor was due to sustained increase in crude oil price, the impact of Eurobond Issuance, and the stable exchange rate condition.

According to Emefiele, the recent launch of the eNaira would improve the conduct of monetary policy in Nigeria, reduce transaction costs and increase financial inclusion in the medium to long term.

“We expect an increase in the availability of credit through the CBN intervention programmes to increase aggregate demand and stimulate growth in key sectors that face credit constraints.
“We expect higher revenue due to stronger revenue administration efforts by the fiscal authorities,” he added.