Market News
Report Projects Naira To Sustain Current Stability -NEW TELEGRAPH
The run of stability enjoyed by the naira in recent weeks is not likely to end soon, Bloomberg reported analysts as saying on Thursday.
According to the report, while the naira has lost 70 per cent against the dollar since foreign exchange controls were relaxed in 2023, including a steep depreciation 12 months ago, its performance since December tells a different story, with the local currency holding in a narrow range roughly between N1,550 and N1,520 per dollar.
“We’re actually quite bullish on the naira, and we think that the naira can stabilise at 1,500, but potentially even stronger,” Deutsche Bank’s chief South African and sub-Saharan Africa economist Danelee Masia told Bloomberg Television’s Jennifer Zabasajja.
She noted that Nigeria had raised dollar reserves, citing the $2.2 billion eu – robond it sold on Dec. 2, while cautioning it remains vulnerable to the price of crude.
The naira’s slide was a deliberate result of relinquishing its longstanding fixed peg against the dollar after President Bola Tinubu took office in May 2023.
Holding the currency at an artificially strong level was blamed for distorting the economy and harming the nation’s exports.
As a result, the change was welcomed by foreign investors and the International Monetary Fund (IMF), even as it drove up the price of imports and worsened a cost-of-living crisis.
Since then, while the Central Bank of Nigeria (CBN) does still intervene in the currency market from time to time to boost liquidity, intervention is not viewed as the reason for recent naira stability, the Bloomberg report said.
The news agency reported Ayo Salami, chief investment officer at Emerging Markets Investment Management Ltd. in London, as saying that monthly dollar inflows into Nigeria were at $2.5 billion from foreign direct investment, versus the CBN’s own supply of $280 million.
“With most of the flows in the forex market coming from non-CBN-related sources, I think it would be reasonable to consider the current FX rate as real,” he said, arguing that Nigeria’s high interest rates are attractive to offshore capital.
