Financial experts are expecting the naira to further strengthen against the dollar at the parallel market in this week after the local currency rose to N530/$1 on Friday from N570 per dollar at the beginning of last week New Telegraph had reported last Thursday that the naira surged to N535/$1 at the parallel market the previous day from N570/$1 which it has traded at in recent weeks, a development that forex dealers attributed to Central Bank of Nigeria’s (CBN) interventions in the market as well as panic dumping by speculators.
In a report released at the weekend, analysts at Financial Derivatives Company Ltd (FDC) said they were expecting the naira to consolidate its gains against the dollar at the parallel market because, according to them, the accretion in the nation’s external reserves will boost the apex bank’s ability to intervene in the forex market, which itself will also record increased supply occasioned by the return to the country of visiting friends and family during the estive season.
The analysts stated: “In the coming week, we expect to see the naira appreciate further at the parallel market.
The accretion in gross external reserves will boost the CBN’s ability to intervene in the forex market and defend the naira. “We expect the apex bank to further increase its forex sales at the Investors and Exporters’ (I&E)FX window supported by higher oil prices (trading above $80pb) and the accretion of the external reserves.
The NAFEX rate remains the official rate which is hovering around N413/$. “We expect the naira to appreciate further (N540/$) in the parallel market on increased forex supply from visiting friends and family during the festive season.”
Forex dealers note that Nigeria’s external reserves, which had maintained an upward trend since August 24, rising to $41.83billion on October 29, dropped to $41.79billion on November 1 and since then have headed south to stand at $41.53billion as at November 11.
The dealers attribute the fall in the reserves to the CBN stepping up its intervention in the forex market. As one of them put it, “the CBN has been pumping dollars massively into the market in recent weeks ahead of the Christmas and New Year celebrations.
This is clearly to take care of the usual surge in demand for forex at this time of the year from importers preparing for the season.”