Leadership CBN May Devalue Naira Over Persistent Oil Price Decline By: NSE ANTHONY-UKO, Bukola Idowu on July 23, 2013 - 3:44am With declining oil prices and dwindling foreign external reserves, the federal government may lower its targeted trading range for the naira. The Central Bank of Nigeria (CBN) has kept the naira within the targeted +/- 3 per cent band around N155, but analysts say the apex bank may devalue the naira adjusting the exchange rate to within a 3 percentage-point band of 160 per dollar from 155 over the next six to nine months if the current situation prevails. According to an analyst at FBN Capital Limited, Gregory Kronsten, lower crude prices are making “it more difficult for the central bank to hold the line on the naira exchange rate.” The naira breached the target for the first time on a closing basis on June 7 and has ended trading above the peg each day since June 25 for a decline of 3.1 per cent this year, according to data compiled by Bloomberg. Head of Research, Africa at Standard Chartered Bank, Razia Khan in an emailed note to Leadership explained that oil output has disappointed relative to budget projections of 2.53 million barrels per day and would put the apex bank on the side of caution. She noted that with “further falls in oil output or the oil price... the CBN might consider an adjustment. But it is not on the cards for the moment.” Emerging markets strategist with Standard Bank Group Samir Gadio, explained that “The oil price has rebounded lately and looks more supported. In the absence of capital inflows over the past two months, the CBN has had to step up its foreign currency auction and direct sales to banks to address the dollar demand-supply mismatch. “Despite the recent moderate decline in foreign exchange reserves, the central bank still has enough ammunition to defend the naira for some time. The risk is also that the CBN may be tempted to tighten liquidity conditions further at the next Monetary Policy Committees (MPC) or in coming weeks, although the surprisingly low June inflation rate probably reduces the possibility of a formal hike in the interest rate for now” , he noted. Yesterday, the naira firmed at the interbank market at N161.20 to the dollar, even as the country’s foreign external reserves further dropped to $46.91 as at July 19, 2013, according to data on the website of the CBN. The naira traded above the band for the first time on a closing basis on June 7 on the interbank market and has ended trading above the peg each day since June 25. Nigeria’s central bank, which sells dollars at auctions on Mondays and Wednesdays to support the naira, sold $700 million last week, compared with $600 million the previous week, at 155.76 to 155.79 per dollar market square and say that this person comes from a family that is known to be thieves and everybody will stop dealing with you. That is even more effective than trying to go to court and then we’ll be there forever and nothing will happen.
Posted on: Tue, 23 Jul 2013 07:38:34 +0000
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