Nairametrics| The plunge in the value of the Naira in the past 2 weeks is set to be reversed, if the optimism of financial experts and economists is anything to by. According to them the plunge was mainly occasioned as a result of the absence of the Central Bank of Nigeria from the market for the past 3 weeks, which worsened the already acute dollar scarcity.
However, it is believed that the resumption of the CBN in the markets will boost forex supply and impact positively on the value of the Naira.
The Managing Director, Cowry Asset Management Limited, Mr. Johnson Chukwu, said, “The CBN is still the major supplier of forex. The central bank has stopped selling forex at the interbank forex market and the Bureau De Change segment in the last three weeks.
“When the CBN resumes forex sales to the BDCs and begins interventions at the interbank market this week, the naira will reverse the loss it recorded last week.”
The expectation of the CBN’s interference in the forex market has been made more feasible by the soaring foreign reserves of the country which has now hit $26.968bn, nearing the $27bn mark, as the latest statistics posted on the Central Bank of Nigeria website have shown.
This latest figures show that the reserves rose to $26.968bn on January 13 from $26.765bn on January 11, having hit $26.658bn and $26.552bn on January and 10 and January 11, respectively. Thus, the CBN has more forex to use in its activities in the forex market.
However, economic experts have warned that any potential strengthening of the Naira may not be sustained over a long period of time due to the mediation of the CBN.
“We expect the pressure in the interbank market to persist as long as the spread remains wide. Consequently, this has continued to incentivise a lot of unethical unpractices. Inflows from Nigerians in Diaspora should improve liquidity in the interbank FX market if the spread with the parallel market is curtailed.” a senior associate in investment banking at Afrinvest, a local research and investment firm, Mr. Ayodeji Ebo said.
