Market News

BY  Collins Nweze | Assistant Business Editor

The rebound in naira exchange rates against the dollar and other global currencies is gradually leading to a drop in the prices of some commodities in the domestic market, analysts at Financial Derivatives Company Limited have said.

In an emailed report to investors at the weekend, Managing Director of Financial Derivatives Company Limited, Bismarck Rewane, announced that the naira at the official and parallel markets rebounded to N1,260/$ and N1,125/$.

As widely expected, the prices of some food items have begun to adjust in line with the sustained naira appreciation.

“Notably, prices of some commodities like rice (50kg) decreased by 5.26 per cent to N90,000, sugar fell by 5.88 per cent to N80,000/bag, flour experienced a decline of 7.81 per cent to N59,000/bag, and noodles (carton) witnessed a significant decrease of 15.22 per cent to N7,800/carton,” Rewane said.

He explained that as more businesses begin to stock up their inventory, prices will likely reflect the naira appreciation.

“In the short term, we anticipate further moderation in commodity prices as the naira sustains recovery due to improved forex supply. Consequently, inflationary pressure is expected to slow in the coming months,” Rewane also said.

The recent foreign exchange (FX) market sanitisation policy of the Central Bank of Nigeria (CBN) has put the naira on a steady path to recovery since hitting an all-time low of N1,915/$ in February at the parallel market.

The rebound in exchange rates was also supported by the boost in forex inflows and the CBN’s sale of dollars to the bureaux de change (BDCs). Foreign portfolio investments have climbed to $2.3 billion in the first two months of 2024.

Rewane said the apex bank achieved a significant milestone by successfully clearing a longstanding burden of its verified foreign exchange backlogs totaling $7 billion.

This achievement fulfills a commitment by CBN Governor Olayemi Cardoso, who promised to address the backlog issue.

CBN’s clearing of the backlog is supporting the bank’s ongoing policy stance to stabilise the exchange rate, curb imported inflation, and boost economic confidence.

“The recent clearance of the FX backlog by the CBN marks a pivotal moment for the nation’s economy, carrying profound implications for several key macroeconomic indicators,” he said.

President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, noted that the ongoing market development showed the willingness of the market to correct itself with a realistic price discovery as naira continues to appreciate further across market with the increasing sources of foreign exchange inflows aided by the CBN policies.

“We also want to pledge our continuing support to the CBN proactive and effective policies and meant to address volatility and headwinds in the forex market.

“As a self-regulatory body, ABCON is currently engaging all stakeholders and players in the retail  end market to deepen, liberalise, democratise and centralise the retail end segments of the market for price discovery, market efficiency, transparency, accretion of buffers and healthy balance of payments.

“We applaud the CBN management for the reconsideration and reinstatement of the BDC sub-sector as the third leg of the forex market to put hoarding and speculation under check and we have seen faster results than expected,” Gwadabe said.