Market News

Naira Appreciates on Official, Parallel FX Mkts Ahead of MPC Meeting - THISDAY

MAY 19, 2024

* Customs rate for import duties rises to N1,530/$

BY  Nume Ekeghe

The naira appreciated by N90 on the parallel segment of the foreign exchange (FX) market yesterday, as it closed at N1,450/$1, compared to the previous day’s rate of N1,540/$1. The positive trend extended to the official Nigerian Autonomous Foreign Exchange Market (NAFEX) window, where the naira appreciated by N36.66, closing at N1,497.33/$1 compared to the N1,533.99/$1 which it closed on Thursday. The comes just as the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is expected to hold its third meeting of the year on Monday and Tuesday next week, with analysts predicting further monetary tightening due to sustained inflationary pressure. However, the Nigeria Customs Service (NCS) has adjusted its FX rate for import duties to N1,530/$, a 6.13 percent increase compared to the N1,441.58 previously adopted.

The significant appreciation recorded by the naira against the greenback on the official and parallel markets yesterday, was attributed partly to recent arrests in Lagos, Abuja, and some other major cities of currency hawkers, sources told THISDAY. The daily FX turnover recorded a decline in transactions of 69.41 per cent, to $83.50 million yesterday, compared to the $272.86 million recorded on Thursday.   Furthermore, the highest spot rate observed yesterday stood at N1,555, with the lowest spot rate recorded at N1,415

In its prediction on the outcome of the MPC meeting, analysts at Cordros Capital Limited, noted that as in previous meetings, “we expect the Committee to consider developments in the global and domestic economy since the last policy meeting. On the global scene, interest rates remain elevated amid the ongoing geopolitical tensions. “Domestically, although consumer prices have slowed on a month-on-month basis, we note that inflation risks are skewed to the upside due to the volatility of the naira in the foreign exchange market and the anticipated review of the minimum wage. “Hence, we anticipate the MPC to tighten its monetary policy, albeit moderately, to manage inflation expectations, tighten monetary conditions and reduce the negative real interest rates.

“Our base expectation is for a 100 basis points increase in the MPR whilst holding other parameters constant.” The Consumer Price Index (CPI) which measures the rate of change in prices of goods and commodity further increased to 33.69 per cent in April compared to 33.20 per cent in the preceding month, the National Bureau of Statistics (NBS) disclosed during the week.

Year-on-year, the headline index stood at 33.69 per cent compared to 22.22 per cent recorded in April 2023. According to the CPI report for the month the food index stood at 40.53 per cent, year-on-year, representing 15.92 per cent increase compared to 24.61 per cent in April last year. Core inflation, including energy prices rose by 6.87 per cent, year-on-year to 26.84 per cent in the review period compared to 19.96 per cent in April 2023. On annualised basis, the rise in food inflation was attributed to increases in prices of millet flour, garri, bread, wheat flour prepacked, semovita (which are under bread and cereals class), yam tuber, water yam, cocoyam (under potatoes, yam and other tubers class).


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