New forex policy: Will Peg naira at 350/dollar – Experts

The naira is expected to trade around 350 per dollar in the coming days as uncertainty over the implementation of the Central Bank of Nigeria’s planned new flexible exchange rate policy persists.

The local currency retreated to 350 to the dollar on the parallel market on Thursday from 360 a dollar last week.

The naira had weakened shortly after the CBN’s Monetary Policy Committee announced plans for new exchange rate policy last Tuesday, but strengthened when the details of the new policy were delayed, Reuters reported.

On the official interbank window, the naira was trading around the peg rate of 197 to the dollar.

“The central bank was still consulting with bank industry players to determine how the new forex policy would work,” one senior banker said.

Economic and financial experts said the CBN needed to release the details of the proposed flexible forex policy as soon as possible.

An economist and Head, Investment and Research, Afrinvest West Africa Limited, Mr. Ayodeji Ebo, said the proposed flexible exchange rate policy would enhance liquidity in the market and help the naira to stabilise.

According to him, the market will continue to remain relatively steady until the details of the policy are announced.

Ebo foresees the naira-dollar exchange rate close to 300 per dollar when the policy is eventually implemented.

According to Reuters, the kwacha is expected to remain under pressure versus the greenback next week due to strong dollar demand in Africa’s second-largest copper producer.

Kenya’s shilling was seen easing, undermined by some foreign investors selling their Treasury bonds due to falling yields.

But its weakening was expected to be limited by prospects of the central bank selling dollars, traders said.

“We are seeing it is bound to weaken. We have foreigners who bought bills and bonds on January booking profits, exiting. They think rates have bottomed now. The central bank is the elephant in the room,” a senior trader at one commercial bank told Reuters.

Ghana’s cedi is expected to remain under pressure due to high dollar demand from oil importers and multinationals repatriating funds abroad.

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CBN fails to clarify new exchange rate policy

The Central Bank of Nigeria has failed to dispel uncertainty over the implementation of the flexible exchange rate policy that will lead to the abandonment of the naira peg, bankers said on Thursday.

A meeting between the CBN Governor, Godwin Emefiele, and local currency traders under the aegis of the Financial Market Dealers Association on Wednesday to discuss the policy did not yield the desired result, according to a report by Reuters.

The central bank announced last week plans to abandon the naira’s 15-month peg to the dollar, which has overvalued the Nigerian currency, harmed investments and caused the economy to contract.

However, the bank has yet to clarify how the new policy would work, spooking foreign investors, long worried about getting caught in the middle of a currency devaluation.

“We are unlikely to get anything in the next two to three weeks. I don’t think the guidelines are ready. The reality is that he (the governor) does not understand the meaning of signals,” said one senior banker, speaking on condition of anonymity.

“By not coming out (with the details) the governor has shown he doesn’t believe the policy. There is the risk the policy could be reversed,” the senior banker added.

However, the CBN said on Thursday that it would issue the guidelines for the flexible exchange rate policy at the “appropriate time.”

Responding to enquiries by our correspondent, the Acting Director, Corporate Communications Department, CBN, Mr. Isaac Okoroafor, said the guideline would soon be released by the apex bank.

“When we are ready, we will release the guideline. Be rest assured that the guideline on the flexible exchange rate policy will be released at the appropriate time by the CBN,” he said and declined to make further comments.

Dollar deals dried up on the interbank market on Thursday as investors stayed on the sidelines, dealers said, in a sign of the continued uncertainty created by the new policy.

The stock market posted its biggest daily decline in 16 months this week as investors waiting for clarity sold shares. The main index gained 1.02 per cent on Thursday, clawing back some losses.

Analysts at DaMina Advisors said the delay could cause the central bank to backtrack as it tried to reconcile the new policy with President Muhammadu Buhari’s vow not to devalue the naira.

The President has for months rejected calls to devalue the naira. During his Democracy Day speech on Sunday, he backed the central bank’s flexible policy on the currency but said he was still against a devaluation.

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