See What Osinbajo Did that Crashed Dollar from N520 to N440 & Exposed Buhari’s ‘Cluelessness’
Acting President Osinbajo last week implemented a new financial policy through the CBN which saw the Dollar crashing from N520 to N440.
Sixteen banks shared in the $230 million foreign exchange (forex) mart by the Central Bank of Nigeria through the forward contract agreement.
This forms part of the fulfillment of the apex bank’s pledge to ensure liquidity in the interbank market under the latest policy announced last week.
Of the 16 financial institutions, 13 are commercial banks, one is a development financing establishment, while two are merchant banks.
An analysis of the auction’s participants showed that nine commercial banks and one merchant got $162.85 million at bid rates ranging from N325/$ to N360/$, while six others got $58.52 million at bid rates between N315/$ and N320/$.
However, the first 10 banks with a total request of $162.85 million in the forwards contract have the maturity date of March 27, 2017, while the other six have a maturity date of April 24, 2017.
Consequently, the parallel market strengthened to N440 per dollar, its highest level in more than three months, following the series of interventions by the apex bank.
Last week, the regulator offered $500 million in 60-day forward contract, but ended up selling $370 million, as some banks could not back up their bids with naira equivalent or provisions.
A sub-Saharan economist for RenCap, Yvonne Mhango, said: “There are rays of light in Nigeria’s outlook…foreign reserves have risen over 20 per cent to $29 billion and a more comfortable CBN has this week announced changes to its foreign exchange policy and injected more dollars into the local market. Since Monday (February 20), the parallel market rate has strengthened,” she said.
Research analyst at FXTM, Lukman Otunuga, said that though Monday’s new foreign exchange policy, which made more dollar available for the few at 20 per cent above the official rate is already easing some pressures, it does little to solve the major problem of multiple exchanges.
According to Otunuga, Nigeria’s five adopted exchanges continue to add to the uncertainty with both firms and investors constantly left confused. The bearish combination of depressed oil prices, foreign exchange scarcity and tepid economic fundamentals continue to expose the Nigerian economy to downside risks.
Analysts at Afrinvest said: “In our view, while the implementation of the revised foreign exchange market guideline has been greeted with much optimism, we do not believe this move can sustainably address the lingering foreign exchange liquidity challenges in the economy without relaxing forex rate peg and review of list of items ineligible for forex transactions in the parallel market.”