THE speculations over imminent devaluation of the nation’s currency
seem to be unabating, even as indication showed that the targeted
exchange rate band may be shifted N170 per dollar.
The new conjecture, according to market analysts, was predicated on the sliding fortunes of the Naira, the current upheaval at the apex bank and eroding confidence in monetary policy.
According to analysts, the central bank will have to fight to keep the Naira within its targeted range of three per cent above or below 155 at twice-weekly foreign-exchange auctions, while the peg may be shifted to 170 per dollar, boosting inflationary pressures.
There was also a speculation that the March meeting of the Monetary Policy Committee will raise its key rate by 100 basis points, thereby tightening the system further.
The Naira, which rose for the first time in six days on Monday, posted its biggest five-day drop in eight months last week.
The yield on Nigeria’s July 2023 dollar bond had its steepest one-day jump on record after Lamido Sanusi’s removal on February 20. The security has lost 2.3 per cent this year, compared with a 0.6 per cent drop in the JPMorgan Chase & Co. index of African sovereign debt.
“While the acting governor pledged continuity in policy, allaying fears of devaluation of the currency, the central bank will however, fight to keep the Naira within its targeted range of three per cent above or below 155 at twice-weekly foreign-exchange auctions. The peg may be shifted to 170 per dollar, boosting inflationary pressures.
“The market seems to be anticipating a devaluation. Given the loss of confidence and sentiment turning against Nigeria, I think they’re going to struggle to keep the Naira at present levels.
“If the currency is devalued in July at the first MPC meeting under Godwin Emefiele, consumer-price growth may climb to as high as 12 per cent by year-end,” Yvonne Mhango, a sub-Saharan Africa economist at Renaissance Capital, said.
But CBN’s spokesman, Ugochukwu Okoroafor, said that Nigeria’s “economic fundamentals cannot be predicated on a single human being. The person coming to succeed Sanusi is a strong player in the industry and knows what to do on monetary policy. There is no basis nursing fears of a devaluation.”
Also, Presidential spokesman, Doyin Okupe, said that the “initial fluctuations following the suspension have stabilized. There’s no indication whatsoever that a devaluation of the Naira will occur.
The currency gained 0.1 per cent to 164.35 per dollar by 10:34 a.m. in Lagos yesterday, strengthening for a second day after the Central Bank of Nigeria auctioned $399.7 million to lenders.
The Naira has declined in five of the past six years, dropping 2.6 per cent in 2013 as the Federal Reserve announced plans to cut stimulus. It last posted an annual gain in 2012.
The new conjecture, according to market analysts, was predicated on the sliding fortunes of the Naira, the current upheaval at the apex bank and eroding confidence in monetary policy.
According to analysts, the central bank will have to fight to keep the Naira within its targeted range of three per cent above or below 155 at twice-weekly foreign-exchange auctions, while the peg may be shifted to 170 per dollar, boosting inflationary pressures.
There was also a speculation that the March meeting of the Monetary Policy Committee will raise its key rate by 100 basis points, thereby tightening the system further.
The Naira, which rose for the first time in six days on Monday, posted its biggest five-day drop in eight months last week.
The yield on Nigeria’s July 2023 dollar bond had its steepest one-day jump on record after Lamido Sanusi’s removal on February 20. The security has lost 2.3 per cent this year, compared with a 0.6 per cent drop in the JPMorgan Chase & Co. index of African sovereign debt.
“While the acting governor pledged continuity in policy, allaying fears of devaluation of the currency, the central bank will however, fight to keep the Naira within its targeted range of three per cent above or below 155 at twice-weekly foreign-exchange auctions. The peg may be shifted to 170 per dollar, boosting inflationary pressures.
“The market seems to be anticipating a devaluation. Given the loss of confidence and sentiment turning against Nigeria, I think they’re going to struggle to keep the Naira at present levels.
“If the currency is devalued in July at the first MPC meeting under Godwin Emefiele, consumer-price growth may climb to as high as 12 per cent by year-end,” Yvonne Mhango, a sub-Saharan Africa economist at Renaissance Capital, said.
But CBN’s spokesman, Ugochukwu Okoroafor, said that Nigeria’s “economic fundamentals cannot be predicated on a single human being. The person coming to succeed Sanusi is a strong player in the industry and knows what to do on monetary policy. There is no basis nursing fears of a devaluation.”
Also, Presidential spokesman, Doyin Okupe, said that the “initial fluctuations following the suspension have stabilized. There’s no indication whatsoever that a devaluation of the Naira will occur.
The currency gained 0.1 per cent to 164.35 per dollar by 10:34 a.m. in Lagos yesterday, strengthening for a second day after the Central Bank of Nigeria auctioned $399.7 million to lenders.
The Naira has declined in five of the past six years, dropping 2.6 per cent in 2013 as the Federal Reserve announced plans to cut stimulus. It last posted an annual gain in 2012.