The value of the naira dropped sharply to N189.36 to the dollar, yesterday, at the interbank market ahead of the decision of the Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) today.
The MPC, which started yesterday, is expected to announce its decisions at the end of its meeting today, and apprehensions over a further devaluation had caused the value of the naira to drop despite the sale of dollars by two banks and one oil company.
The naira, which sold at N185 last week, dropped to a low of N191 before it closed the interbank market at N189.36 to the dollar.
Dealers said two banks had sold foreign currency to stay within the 0.01 per cent net open position of the CBN while the oil company sold dollars to meet local obligations. Analysts say they expect the MPC to leave its decisions at the last meeting unchanged ahead of the general elections despite the tense economic atmosphere. Global oil prices had dropped to $45 per barrel before it picked up over the weekend to $50 per barrel. Also the CBN’s capacity to continue to defend the naira is thinking out considering the level of the nation’s external reserves.
The MPC at its previous meeting in November 2014 had raised the benchmark interest rate by 100 basis points from 12-13 per cent with the interest rate corridor of +/-2 per cent. It also created a stir in the market when it moved the mid-point of the foreign exchange rate to N168 to the dollar with a band of +/-5 per cent from N155 to the dollar with a band of +/-3 per cent. Also, it had increased the cash reserve requirement (CRR) on the private sector funds to 20 per cent from 15 per cent while it maintained the CRR on the public sector funds at 75 per cent and the Liquidity Ratio (LR) at 30 per cent.
Sub-Saharan Africa economist for Renaissance Capital, Yvonne Mhango, predicts that the value of Nigeria’s currency will further decline this year on the back of low oil prices. “It will probably drop to 220 by the end of 2015. We see no respite over the short term. Johannesburg-based Mhango said the reversal of inflows and low foreign-exchange reserves imply “a sizable naira depreciation is coming.” Leadership
The MPC, which started yesterday, is expected to announce its decisions at the end of its meeting today, and apprehensions over a further devaluation had caused the value of the naira to drop despite the sale of dollars by two banks and one oil company.
The naira, which sold at N185 last week, dropped to a low of N191 before it closed the interbank market at N189.36 to the dollar.
Dealers said two banks had sold foreign currency to stay within the 0.01 per cent net open position of the CBN while the oil company sold dollars to meet local obligations. Analysts say they expect the MPC to leave its decisions at the last meeting unchanged ahead of the general elections despite the tense economic atmosphere. Global oil prices had dropped to $45 per barrel before it picked up over the weekend to $50 per barrel. Also the CBN’s capacity to continue to defend the naira is thinking out considering the level of the nation’s external reserves.
The MPC at its previous meeting in November 2014 had raised the benchmark interest rate by 100 basis points from 12-13 per cent with the interest rate corridor of +/-2 per cent. It also created a stir in the market when it moved the mid-point of the foreign exchange rate to N168 to the dollar with a band of +/-5 per cent from N155 to the dollar with a band of +/-3 per cent. Also, it had increased the cash reserve requirement (CRR) on the private sector funds to 20 per cent from 15 per cent while it maintained the CRR on the public sector funds at 75 per cent and the Liquidity Ratio (LR) at 30 per cent.
Sub-Saharan Africa economist for Renaissance Capital, Yvonne Mhango, predicts that the value of Nigeria’s currency will further decline this year on the back of low oil prices. “It will probably drop to 220 by the end of 2015. We see no respite over the short term. Johannesburg-based Mhango said the reversal of inflows and low foreign-exchange reserves imply “a sizable naira depreciation is coming.” Leadership
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