Naira Firms against Dollar as Banks Sold Down Their Dollar Positions

In the Interbank forex market, the Nigerian currency, the naira, firmed against the U.S dollar on Monday, June 9, at N162.65 compared with N162.95 per dollar at Fridays close.

In expectation of dollar inflows from the Nigerian National Petroleum Corporation which usually sells dollars to some banks on a monthly basis, many banks sold down their dollar positions. The NNPC accounts for 70% of the volume of dollars traded on the interbank market.

A dealer said ‘’The market has also calmed since the new central bank governor made the clarification on his plan to gradually reduce interest rates, which was one of the reasons the market was jittery previously’’.

The new Governor of the Central Bank of Nigeria, Godwin Emefiele, told Reuters on Friday that the bank had no immediate plans to cut interest rates and definitely would not consider doing so until after the presidential election in February 2015.

According to foreign exchange dealers, the comments made by Emefiele were encouraging and this helped to minimize the instability in the market.

They also helped the naira to recover some losses triggered after Emefiele had said at his inaugural press conference on Thursday that he would seek to gradually lower interest rates, which markets took as an indication that a rate cut could come soon.

Rates have stayed at 12 per cent since late 2011, helping to bring down inflation but businesses say they are retaliatory.

Dealers said the naira should strengthen further on Tuesday if the NNPC dollar sale materialized.