It became clearer in the forex market yesterday that Nigeria’s local currency, the naira, may be on a permanent journey back to its former value, put at less than N300 to the dollar.
This is coming just as the Central Bank of Nigeria (CBN) has released fresh $180 million into the foreign exchange market, as part of its efforts to alleviate the sufferings of Nigerians sourcing forex for school fees, medicals and personal traveling allowance (PTA).
The bank said yesterday that it released $80 million for PTA, school fees, medicals and another $100 million for the wholesale forwards market.
According to it, in keeping with the new shift in focus and response to increased build-up of reserves, increase liquidity in the foreign exchange market last week caused a crash in rates at the parallel market.
The naira traded at N315 to the dollar at the interbank market at the close of business on Monday.
In a statement signed by its spokesman, Isaac Okorafor, the CBN said, while its commitment to providing enough forex for legitimate business remains unshaken, it would do “everything possible” to ensure the steady supply of forex to the market.
Efforts by the CBN in making available large amounts of forex to the market had led to the appreciation of the naira by over N85 in less than one week, as the apex bank pumped about $700 million into the forex market.
Bureau de change operators said the market is expecting the naira to settle around N385 per dollar in the coming days, following last week’s sale of forex at the interbank market by the apex bank, driving a gain in the local currency which rose by 12 per cent. The value of the naira last week rose from N522 to the dollar to N460 at the parallel market.
The value of the naira further rose yesterday, the first trading day of the week to N455 at the parallel market, with traders saying they expect the trend to continue, as the apex bank continue to meet demand at the interbank market
On a radio programme yesterday, the apex bank warned market players and keepers of dollars to make hay and sell their holdings in order to avoid heavy losses, even as it maintained that much of the dollar demand had been a bubble created by speculators and hoarders of the greenback.
The naira had made a significant recovery against the United States dollar as it traded at N450/$ last Friday, compared to the N525/$ it traded penultimate Friday.
The CBN had last Thursday sold $221,371,218.04 to banks in its second special wholesale intervention forwards since the new foreign exchange (FX) policy actions were announced a week ago.
A breakdown of the amount sold by the CBN showed that it auctioned $162,850,000 to 10 banks in a transaction with 30 days tenor, while six banks participated in a separate auction with 60 days tenor in which $58,521,217.04 was sold.
Meanwhile, the apex bank said it will auction $100 million in forward contracts and also raise N310.14 billion through Treasury Bills auction tomorrow, Wednesday, March 1, 2016, even as the naira continued to gain strength.
The CBN hinted of plans to mop up N310.14 billion from the system through the sale of 91, 182 and 364 days Treasury Bills, saying it will raise N26.14 billion through 91 day bills while, it will also raise N62 billion and N222 billion through 182 and 364 spray bills.
The Treasury Bills sale will be a roll over as there will be a Treasury Bills maturity of N310.2 billion and analysts say they expect the auction to be oversubscribed, given the attractive yields each of the instruments offer.
Performance in the Treasury Bills market last week was largely bearish due to tighter system liquidity during the week. Average yield trended higher on most trading sessions, up 36 basis points last week Monday but eased by mid-week as system liquidity improved. Nonetheless, average rate rose 55bps Week-on-Week closing at 16.9 per cent on Friday.