The Central Bank of Nigeria will at 2pm Tuesday release details of its new Flexible Exchange Rate Policy to an audience that have been waiting for weeks. The announcement is expected to pave the way for a new exchange rate regime where it is expected that the market will play a major role in determining the price of Naira against the dollar.
Once this announcement is made, it is expected that market forces will react positively across the Nigerian economy. This of course depends on if the CBN releases details that tend towards a complete removal of capital controls thus ushering in a market determined exchange rate.
The Nigerian stock market we believe could stage a major rally after the announcement is made as foreign investors will be expected to return to the stock market that has been starved of funds for months. Back in May when the CBN gave indications of a change to policy the market gained about 6% or over N700 billion only. For a month of May that investors typically caption as “sell in may” the market closed positively in one of the best performances for any month in the year.
So are we going to see a major bull ride today? We wait and see.