The Central Bank of Nigeria on Thursday made
a slight adjustment to its naira-dollar exchange
rate peg, data on its website showed.
The bank adjusted the rate at which it sold the
United States dollar from N197 to N196.95,
Reuters reports.
Prior to Thursday’s action, the rate had been
oscillating between N197 and N199 for a few
months.
Economic and financial analysts said the action
might indicate that the CBN was beginning to
think about how to loosen its currency regime.
They noted that the change was too small to be
called a revaluation, particularly in the face of
dwindling foreign reserves.
The naira had traded on thin volumes at 198.95
to the dollar on the interbank market on
Thursday, before two large sales totalling
$36.4m were done at N196.95 towards the
close of the forex market, foreign exchange
dealers said.
The dealers attributed the sale to the central
bank. The naira is trading between 215 and 218
against the dollar at the parallel market.
An economist said the move might suggest that
the bank was testing out the market to see
whether it was ready for a looser currency
regime.
“Small changes in the rate could possibly allow
the central bank to gauge the changes in
demand and supply dynamics, which will inform
decisions on when and how best to start lifting
forex restrictions,” an analyst at South Africa’s
NKC Independent Economists, Cobus de Hart,
said.
The CBN, however, described Thursday’s rate
movement as a simple reflection of the state of
dollar supply in the market.
“We are not fixing rates. The present rate is a
reflection of the level of dollar supply in the
market,” the CBN spokesman, Ibrahim Muazu,
told Reuters .
Head, Investment and Research, Afrinvest West
Africa Limited, an investment research and
advisory firm, Mr. Ayodeji Ebo, said the CBN’s
action might be linked to the relatively reduced
pressure on the external reserves.
“It is a rate adjustment but it is too small to be
called a revaluation. The adjustment is too
small to cause any pressure on the naira. The
CBN feels the action will not affect its defence
of the naira,” he said.
A currency strategist, who spoke on condition
of anonymity, said the adjustment was too
small to cause any change in the market.
“It is just about five kobo difference. That is not
much. Nothing has changed in the market
really,” the analyst said.
Another economist, however, said the move
would hurt the country’s precarious forex
reserves position.
“By lowering the central bank rate offered to
banks albeit very moderately, the central bank
is adding to pressures on forex reserves …
equivalent to around 4.9 months of imports,”
the Head of Research at Ecobank, Angus
Downie, said.
The nation’s external reserves had fallen to
$29.4bn as of June 2, down 20.1 per cent from
a year ago as the central bank burns cash to
defend the local currency.
The naira has lost 8.5 per cent of its value since
the start of the year after sharp falls in the
price of oil. That forced the central bank into a
de facto devaluation and fixing of the exchange
rate in February in order to protect its
dwindling foreign reserves.
The regulator also banned commercial lenders
from re-selling central bank dollars among
themselves, which was an attempt to curb
speculation on the naira.
Source: www.punchng.com/business/business-economy/cbn-slightly-adjusts-naira-dollar-foreign-exchange-rate/
