Naira Goes in an Upward Trend In new Market Value To Dollar

The naira maintained its upward trend in the parallel market yesterday, appreciating to N345 per dollar in response to decline in demand for dollars occasioned by anxiety over the possible outcome of the Monetary Policy Committee (MPC) meeting coming up next week.

Vanguard investigation revealed that the parallel market exchange rate fell to N345 per dollar yesterday from N350 per dollar on Monday, implying appreciation of N5 for the nation’s currency.
The naira has appreciated by N25 against the dollar since Friday when the parallel market exchange rate stood at N370 per dollar in response to anticipated increase in demand due to deregulation of petroleum products importation and rumours about imminent official devaluation of the naira by the Central Bank of Nigeria (CBN).
Bureaux De Change operators attributed the increased appreciation of the naira to anxiety over the possible outcome of the MPC meeting scheduled to hold from Monday to Tuesday next week.
“Demand for dollars is weak today because market participants, especially, buyers are anxious about the outcome of the MPC meeting”, said Aminu Gwadabe, President Association of Bureaux De Change Operators of Nigeria (ABCON).
Confirming this development, Financial Derivatives Company Limited, said “Nigerians are extremely nervous about the possible outcomes of the next MPC meeting. This is because of a confluence of negative developments ranging from a sharp fall in the production of oil, deepening external reserves, spiralling inflation and sharply lower Gross Domestic Product (GDP) growth.
There has hardly been a time in the history of Nigeria that the Central Bank has been faced with such stark and hard choices. Unfortunately, there is no silver bullet. Reviewing the impact of the sharp increase in inflation rate to 13.6 percent in April on the financial markets and the outcome of the MPC meeting, “The Company stated, “The MPC is expected to seriously consider the consequence of high inflation on investor returns. A tighter monetary environment (hiking interest rates) could result in investors shifting to the fixed income market due to attractive interest rates. In addition, NIBOR and T-bill rates would be expected to increase.
“Given the underperformance of the stock market with a negative YTD return of (6.35%), we expect capital outflow from the Nigerian bourse, as investors become attracted to high interest fixed income instruments.
“We expect a cocktail of measures or a sequence of steps aimed at controlling inflation, maintaining currency stability and stimulating growth. The order in which these decisions will be taken is a subject of great uncertainty and anticipation.”