Following the shut-down of inter-bank foreign exchange (Forex) market as a result of a three-day Eid-el-Fitri holiday, the Naira exchange rate remained stable at Monday’s close of N282.02 to the dollar till Friday, July 8, 2016.
Similarly, the local currency at the Nigerian black market which traded randomly with no uniform rate throughout the holiday period, closed on Wednesday at N352 to the greenback, and remained stable at the same rate till the end of the break on Friday.
The holiday lasted from Tuesday 5, to Thursday 7, July 2016, grounding economic activities to a halt until skeletal resumption of activities on Friday.
However, the local currency, during the week lost N8.68 to the British Pounds as it traded for N366.1206 on Friday compared to Monday’s close of N374.8062 to the Pounds Sterling. It also lost N2.4252 against the Euro as it traded for N311.9484 on Friday compared to Monday’s close of N314.3736 to the Euro at the interbank market.
Some operators in Lagos said the holiday could have contributed to the nation’s currency plummeting as Nigerians were unable to trade via banks, bonds and other monetary instruments.
“The rate has been far from consistent and Nigerians could not trade as much as they would have wanted because of the Ramadan break. Some of us don’t even have to sell and Nigerians can barely buy,” one dealer said.
Meanwhile, analysts led by the Managing Director of Financial Derivatives Company (FDC) Limited, Mr Bismark Rewane said the market is still digesting the impact of the N1.3 trillion debits by the Central Bank of Nigeria (CBN) for the $4.02 billion forward currency sale on June 20.
The bank auctioned $3.5 billion on the futures market to clear a backlog of currency demand after it lifted its 16-month-old peg to allow the Naira trade freely on the interbank market.
It sold $697 million in one-month futures, $1.22 billion in two-month contract and $1.57 billion due in three months.
“The Naira is still trying to find its true value in the transition from an imperfect towards a more efficient forex market. The apparent lack of liquidity in the spot market is hampering the effective development of a forward and futures market. A 0.4 per cent of a decline in the rate of inflation will be exchange rate neutral.
“The market will be awaiting the outcome of the next monetary policy committee direction. It will also be looking forward to CBN’s willingness and ability to settle the 90-day forward contracts entered into on June 20; maturing on September 17. However, analysts will derive some comfort from a lower inflation rate because the Purchasing Power Parity value of the Naira will actually appreciate,” the FDC analysts stated in their recently released July Economic Bulletin.