07 December 2014, Abuja – THE nation’s legal tender- the Naira, fell further last week, as the foreign exchange market’s volatility against the currency persisted.
Specifically, the currency drifted to an all-time low of N190.00/$ at the Bureau De Change segment and N187/$ at the Interbank market.
It however gained ground during the middle of the week at the interbank market due to adhoc intervention of the Central Bank of Nigeria (CBN), trending within the upper bands of N170/$1.
Meanwhile, CBN offered $400 million at the official window- Retail Dutch Auction System (RDAS) last week, which was done in tranches of $200 million for Monday and Wednesday.
Expectedly, there was disequilibrium as demand exceeded the supply, resulting in a total sale of US$458 million at a marginal rate of N168 per dollar at the bi-weekly auctions.
Already, analysts seemed to be pessimistic, as the Naira has been projected to plunge further over demand increases ahead of the yuletide season.
Week-on-week, the currency has depreciated N2.40 (-0.8 per cent) at the Inter-bank segment to close at N180.10/$.
According to Afrinvest report and analysis, “Naira will be driven by a moderate level of pressure in anticipation of demand for the green back during the yuletide season.”
The company pointed out that the consistent slump in crude oil prices, which has prompted a second adjustment in the federal government’s proposed 2015 crude oil benchmark price to $65 per barrel, may exacerbate with the prospects of offering a subsidy to Shale producers.
It noted that cautious transactions still persist in the capital market as uncertainties in the macro landscape dampens confidence, while the options of increasing taxes on luxury goods and cut in spending will require a radical re-invigoration of various sectors of the economy, particularly the power sector.
However, the demand pressure for liquidity during the week remained very high with most rates trading at their year high levels.
The Nigeria Interbank Offered Rate (NIBOR) and Open Buy Back (OBB) rates closed at an average of 18.3 per cent and 30 per cent respectively, while the Call and Overnight rates traded as high as 25.4 per cent and 30.9 per cent respectively.
Afrinvest analysts said that following the CBN’s hike in private sector Cash Reserve Requirement from 15 per cent to 20 per cent, there has been liquidity stiffening at the interbank, which has made most banks scramble for funds to meet their liquidity requirement for the increased CRR.
Additionally, the increase in the Monetary Policy Rate to 13 per cent from 12 per cent has also contributed to the high rates experienced within the money market space.