Why naira rally will continue - ABCON

The ongoing rally of the naira at both official and parallel markets will continue given some strategic steps taken by the Central Bank of Nigeria (CBN) to stabilise the local currency.

President, Association of Bureau De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, who made the disclosure at the weekend, said the apex bank is not only boosting dollar liquidity in the market, but is mopping up cash through interest rates hike to keep the naira stable.

The local currency, which crossed N1,350/$1 at the parallel market a week ago, strengthened to N1,035/$1, with analysts predicting further firming-up in the weeks ahead.

Data from FMDQ Exchange showed that at the Investors and Exporters (I&E) window- official market- the local currency on Friday rallied to N776.14/$1 with $99 million transaction volume.

Gwadabe said: “The development stems from the ‘double-edged sword dollar liquidity injection and the mopping up of the naira through interest rate hikes”.

“What is happening in the market and the continues naira rebounds is the manifestation of the CBN double-edged sword measures of dollar liquidity injection and naira mopping through the instrumentality of interest rates hikes.”

The ABCON boss warned that forex speculators will more than ever before face create risk of losing their fund.

The ABCON boss, however, said that the speculators are usually interested on the elements of sustainability of the feat so far achieved, arguing that it is panic selling as against panic buying.

He said: “It is a good development as it is a greater risk to speculate, hoard and substitute naira for other currencies.”

Gwadabe urged the management of CBN to continue to make clarifications and implement some of the association’s recommendations in charting a way forward for naira stability at the FX market.

He advised the apex bank to include BDCs in the foreign exchange market in view of their roles in meeting the needs of the critical retail end sector.

He noted: “The BDCs are necessary in the demand measures of the apex bank, transaction monitoring mechanism and clients utilisation with correcting and moderating potentials.”

He said that the country is experiencing increasing reserves due to increased demand of crude oil, its major export commodity.

Gwadabe said: “This is due largely to the U.S. increasing inventories and the escalation of tension in the Middle-East,” he explained.

*As we continue to observe developments, there is the need to exercise caution in attacking the naira as it all appears that the CBN seems poised to sustain the gains already recorded at the market.”