Brexit will Boost Nigeria’s Foreign Exchange Policy – CBN

The Central Bank of Nigeria (CBN) said that the decision of the British people to leave the European Union (EU) will boost Nigeria’s foreign exchange policy. Commenting on the outcome of the British referendum on Friday, CBN Deputy Governor, Economic Policy, Dr. Sarah Alade told Reuters that the bank expected Britain’s vote to exit the European Union to be good for its foreign exchange policy as interest rates are likely to stay low in the U.S., channelling foreign investors to Nigeria.

Brexit will Boost Nigeria's Foreign Exchange Policy - CBN
Brexit will Boost Nigeria’s Foreign Exchange Policy – CBN

“We only need to take advantage of this opportunity to grow the economy,” she said. Meanwhile the naira ended the first week of the revived interbank foreign exchange market on a positive note on Friday. From N281.67 per dollar on Thursday, the interbank exchange rate dropped to N281.14 per dollar for spot transactions, indicating 53 kobo appreciation.

Recall that the revived interbank foreign exchange market commenced on Monday, with the CBN selling $4.2 billion in the spot and Futures market to clear backlog of matured foreign exchange obligations. According to FMDQ, the CBN sold $532 million in the spot market (immediate delivery) and $3.489 billion in the Futures market (delivery in the future).

Out of the $3.487 billion sold in the Futures market, $697 billion is for One Month Future (1M), $1.22 billion for Two Months (2M) and $1.57 billion for Three Months (3M). Subsequently, the CBN participated in the market through the 15 banks appointed as Primary Foreign Exchange Dealers (FXDP). It is estimated that the apex bank sold $400 million through the PFXDs during the week.

At the commencement of the market on Monday, the interbank exchange rate closed at N281.85 per cent per dollar, rose to N284.83 on Tuesday before dropping to N282.8 on Wednesday and N281.67 on Thursday. Hence, the naira depreciated by 71 kobo between Monday and Friday. The Naira however appreciated in the parallel market last week by N10.

From N355 per dollar the previous week, the parallel market exchange rate dropped to N345 per dollar on Friday due to panic selling by individuals and slowdown in demand. According to analysts at Cowry Assets Management Company, the naira will enjoy stability in the foreign exchange market this week due to slowdown in demand by end users.