Market News

by Collins Nweze | Assistant Business Editor

The naira fell 1.08 per cent to close at N1,400 to dollar in the parallel market two days after the Central Bank of Nigeria (CBN)-led Monetary Policy Committee (MPC) cut benchmarkt interest rate by 350 basis points.

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The local currency however, shrugged off exchange rate pressures  at the official window, where it firmed 0.23 per cent to N1,328 to dollar.

The exchnage rate position widened the gap between official and parallel market rates to N72 to dollar.

In emailed note to investors, Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said the MPC cut the policy rate to 23 per cent from 26.50 per cent and narrowed the corridor to plus 50 and minus 300 basis points.

The move he said put the deposit window at 20 per cent and lending at 23.50 per cent.

President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said despite current pressure on the nira, the local currency still has great potential.

The rising foreign reserves at nearly $55 billion, he said presents great buffer for the naira gainst global shcoks.

Other analysts said yields fell across every tenor at Wednesday’s auction. The 364 day bill cleared at 15.89 per cent from 16.62 per cent, a true yield of 18.89 per cent, on bids of N4.09 trillion against N400 billion offered and N447.07 billion allotted.

The 91 day at 15.50 per cent and the 182 day at 15.80 per cent were both undersubscribed.

Rewane said: “Why it matters, the transmission everyone was waiting for has arrived, and it has gone into the bond market rather than into credit. For Nigeria, today’s money market rates confirm it. The open repo rate fell a full point to 21.00 per cent and overnight to 21.76 per cent, against 22.00 per cent and 22.27 per cent yesterday”.

“The price of money has finally moved. What has not moved is the direction of the money itself, which is still going to the CBN. Cardoso called the corridor change an operational reset rather than a shift in stance, and both markets have taken him at his word”.

The Central Bank of Nigeria (CBN) explained that monetary reform cannot be effective in a vacuum.

Alignment with fiscal policy has strengthened Nigeria’s macro stability and yielded tangible results including reduced domestic borrowing costs, improved liquidity conditions, and more predictable fiscal operations.