By Jeph Ajobaju, Chief Copy Editor
Nigeria’s naira has traded at 360.15 to the dollar on the over-the-counter market for investors, up from 360.65 a week ago, raising hopes of a continued trend buoyed by the Central Bank of Nigeria (CBN).
On the official market supported by the CBN, the naira went for 306.90 to the dollar.
It notched 360.65 per dollar on the over-the-counter market for investors on February 28, up from 361.50 a week earlier.
That happened after the CBN on February 26 injected $120 million into the foreign exchange (forex) market to stabilise the naira.
The latest gain came despite possible shift in financial market policy with the likely replacement of CBN Governor, Godwin Emefiele, after his five-year tenure expires in June.
Emefiele assumed office in June 2014 and could still serve another five years, but has reportedly begun the usual three-month terminal leave CBN bosses take towards the end of service.
Reuters quotes traders as saying the naira could gain further against the United States dollar in week commencing March 11 as foreign investors continue to buy bonds at high yields.
Foreign investors are buying Nigerian bonds for yields as high as 15 per cent, helping boost dollar flows on the currency market.
“The market is very liquid. We haven’t heard that foreign investors have overweight Nigeria or that yields are running down fast,” one trader said.
Traders expect more inflows into the bond market especially after a debt auction last week attracted more than 10 times the amount the government had offered to sell.
“There’s a lot of foreign interest in bonds and that’s helping the naira strengthen. I expect more flows [in week commencing March 4] as yields remain attractive at current levels,” one trader said.
Will intervention remain after Emefiele?
Under Emefiele’s watch, the CBN last year began pumping dollars into the forex market to prop up the naira and stabilise the price of imports.
On February 26, 2019, it allotted $100 million to authorised dealers in the wholesale segment of the market.
Small and Medium Enterprises (SME) customers received $55 million. Another $55 million was earmarked for tuition fees, medical payments, and Basic Travel Allowance (BTA) among others.
On February 22, the CBN injected $268.4 million and CNY46.3 million into the Retail Secondary Market Intervention Sales (SMIS) segment.
The CBN pledged on February 26 to continue to intervene in the interbank forex market to sustain liquidity and maintain stability.
But it is unclear if the intervention will remain after Emefiele’s departure.
