By Jeph Ajobaju, Chief Copy Editor
Nigeria’s naira has gained strength against the dollar after the successful conclusion of the presidential ballot cooled both local and foreign nerves and $120 million was pumped into the foreign exchange (forex) market.
The currency is expected to keep firming in the coming weeks, propped up in party by the injection by the Central Bank of Nigeria (CBN) on February 26.
There are at least three different exchange rates to manage pressure on the naira – the official rate of the CBN, interbank rate, and the rate at bureaux du change (BDCs).
The naira firmed to 360.65 per dollar on the over-the-counter market for investors on February 28, up from 361.50 a week earlier, according to Reuters.
On the official market, the naira was quoted at 306.80, supported by the CBN.
Earlier in the week, it exchanged at an average of N360 to a dollar in the BDC segment.
Reuters reports that foreign investors have piled into bonds to lock up yields as high as 15 per cent.
Traders expect more inflows into the bond market especially after a debt auction this 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 next week as yields remain attractive at current levels,” one trader said.
CBN boost
On February 26, CBN Director (Corporate Communications), Isaac Okorafor, said $100 million was offered to authorised dealers in the wholesale segment of the market.
Customers in the Small and Medium Enterprises (SME) segment received $55 million. Another $55 million was ring fenced for tuition fees, medical payments, and Basic Travel Allowance among others.
The CBN pledged to continue to intervene in the interbank forex market to sustain liquidity in the market and maintain stability.
It had on February 22 injected $268.4 million and CNY46.3 million into the Retail Secondary Market Intervention Sales (SMIS) segment.
Impact of political stability
Before the presidential vote, foreign investors had shown they were not jittery about its outcome, with many anticipating good yields on their portfolio regardless of who occupies Aso Rock for the next four years.
President Muhammadu Buhari won reelection on February 23 and has promised an all-inclusive government.
His main challenger, Atiku Abubakar, wants to challenge the victory in court but says he may hold his fire on the entreaties of the Peace Committee headed by former Head of State Abdulsalami Abukakar.
Other members of the committee include John Cardinal Onayekan; former Foreign Affairs Minister, Bolaji Akinyemi; and Bishop Martin Kukah.
Atiku was quoted as saying on February 28 that he would not go to court if Buhari agrees, among other conditions, to
- Releases all political prisoners.
- Signs the electoral bill into law.
- Does deploy troops for the state elections on March 9.
Political stability will also grow business confidence and help stabilise the economy.
Before the vote, one stock market trader in Lagos told Reuters: “If the incumbent wins, status quo could remain and if the main opposition wins … they sound more pro-market so investors have nothing to lose.”
Foreign investors are buying Nigerian bonds partly to offset lower yields abroad, especially after the United States Federal Reserves signalled a dovish stance on rates this year.
Investors also assume limited policy changes in Nigeria upon Buhari’s reelection.
