Naira May Strengthen This Week
While some said the naira would experience further decline at the parallel market this year, others said the volatility noticed in the exchange rate last year could not continue this year.
Economic and currency experts have expressed divergent views over the outlook of the naira this year.
The naira is seen strengthening in the near term as Bureau De Change operators expect dollar supplies from international money transfer agents to boost liquidity.
The local currency held steady at 490 to the dollar on the parallel market on Friday, the same level as the previous week, while the naira was quoted at 305 to the dollar at the official interbank window, Reuters reported.
“We continue to see the naira hovering between 400 and 480 as the Central Bank of Nigeria fine-tunes its policy to streamline rates and as we see an increased dollar supply,” the President, Association of Bureau De Change Operators, Aminu Gwadabe, said.
“We will continue to see reasonable volatility of the naira during the first half of this year. The fundamental issues underlying the volatility of the naira have not been addressed,” a currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said.
According to Ezun, the naira will continue to depreciate at the parallel market while the Central Bank of Nigeria will keep managing the official rate around 305/dollar.
“It will depreciate further but there has been some resistance around 500/dollar. The CBN seems to have come to the end of monetary policy because it is the issue of liquidity,” the Ecobank analyst added.
For a director at the Union Capital Markets, Mr. Egie Akpata, the direction of the naira-dollar exchange rate this year will be determined by the CBN’s policies, oil output and price.
He said, “A lot depends on what the CBN does because exchange rate is driven by the kind of administrative management in place at the forex market. The direction of the oil price and output this year will also determine which way the exchange rate will go.”
An economic analyst at EY, Mr. Bisi Sanda, believes most economic indicators are moving in the direction that is favourable to the country.
He, however, said that unless the economic and forex managers used this to the country’s advantage, the naira and the economy in general would be thrown into further chaos.