'Naira’ll appreciate to 490/$1 at parallel market' - Rewane

The naira will appreciate in the parallel market towards 490-495 against the dollar in August/September after hitting a record low following the stoppage of foreign exchange supply to Bureaux de Change, the Managing Director of Financial Derivatives Company Limited, Mr Bismarck Rewane, has said.

Rewane said this at this month’s edition of the LBS Breakfast Session in his presentation, a copy of which was obtained by our correspondent on Monday.

The naira had plunged to 525/$ at the parallel market on July 29, a day after the Central Bank of Nigeria stopped forex sales to BDCs. It closed at 510/$ on Monday.

The financial expert noted that the International Monetary Fund last month approved $650bn of special drawing rights for member countries, adding that Nigeria would receive $3.35bn to support external reserves build-up.

“Gross external reserves will get a bump from the SDR facility. Naira will appreciate in the parallel market towards N490-495/$,” he said while highlighting the outlook for August/September.

He said the country’s external reserves accretion would continue on improved dollar cash flow. The external reserves rose to $33.56bn as of August 6 from $33.40bn at the end of July, according to CBN data.

According to Rewane, the naira is expected to gravitate towards a fair value of 470/$ to 490/$ at the parallel market provided supply increases and a crawling peg is adopted.

“The CBN will increase forex supply, especially to airlines and invisibles. Interbank interest rates will climb back up to the 15-20 per cent range. AS CRR, other debits squeeze liquidity in the system, investors will remain tentative until signs of policy stability become manifest,” he said.

Analysts at FDC noted that most pessimists were of the view that the naira was likely to plunge to 700/$ after the BDCs were stopped from buying dollars from the CBN.

“We continue to hold the view that the naira will continue to appreciate towards fair value (N470-N490/$) in the parallel market as long as the CBN increases forex supply. However, corporates remain nervous as to policy direction and uncertainty remains,” they said.