The naira closed higher at the interbank market today gaining 0.66% to close at N178.7 compared to its close of N179.9 on Friday. These were the two main reasons why it closed higher.
- Dollar Sales – Two major oil companies, Total and NLNL sold dollars today which help boost liquidity. Total alone sold $74million helping provide some comfort for the CBN that has been under immense demand pressure.
- Naira Squeeze – Another reason was the anticipated effects of deduction of banks deposits by the CBN. The CBN had during the MPC meeting, increased the cash reserve requirements for private sector deposits to 20% from 15%. The NNPC also transferred some of its Naira deposits to the CBN in compliance with CBN instructions.
- With less naira available to banks, there will be few local currency chasing the dollar inadvertently helping close the demand side for the dollar
- It is not clear how long more the naira can hold of before succumbing under pressure again
- Naira/Dollar exchange rate at the black market was still between N188-190 depending on where you buy it from
