The naira continued its rally on Friday trading at N351 against a dollar at the parallel market in Lagos, Nigeria’s commercial hub and nation’s capital, Abuja.
The weakened naira has rallied from N375 to N351 in just two days following the Central Bank of Nigeria’s (CBN) announcement of a new foreign exchange policy and allowing the naira to float. The policy takes effect on Monday. The naira sold at N362 on Thursday, a day after the announcement by Governor Godwin Emefiele and closed at N351 Friday.
The N197-$1 official rate pegged by the CBN will be officially scrapped on Monday.
Traders told THEWILL that the naira will continue the rally through the weekend against the dollar and other major currencies as speculators continue to sell hard currencies into the market ahead of the kick start of the new forex policy of the CBN on Monday.
CBN Governor Emefiele in a recent letter to President Muhammadu Buhari which was leaked to the press said he sees the naira rallying to N250 -$1 in the long term.
Emefiele also said foreign reserve stood at about $28 billion, enough to cover about 6 months of Nigeria’s import needs. He added that the apex bank still had about $4 billion in backlogged demand for forex that it expects to clear in the coming days.
The IMF, EU, financial analysts, economists and stakeholders have lauded the new policy saying it would reignite growth in the economy and make scarce foreign exchange available both on the short and longterm.
The naira’s rebound came as the Central Bank of Nigeria (CBN) mopped up liquidity through Treasury Bills which it sold at higher rates.
Prior to the commencement of the policy on Monday, the apex bank had mopped up liquidity in the banking system, selling long dated Treasury Bills at higher yields than in the secondary market.
Traders said the CBN sold N205.9 billion worth of one-year bills Friday at 13.5 per cent, compared with the secondary market rate of 10.81 per cent and had offered N78 billion in bills on Thursday.
There was cash of N1.06 trillion on offer in the market Friday before the bank auctioned the bills, traders said.
Overnight rates at the interbank market had dropped by 250 basis points to 1.5 per cent from last week, driven by excess liquidity, prompting the CBN to mop up the naira at higher rates to support its new currency regime.
