Oil price notch-up, currency deal strengthen Naira value

The yet-to-be executed currency swap deal between Nigeria and China may have propped up the value of the Naira against US Dollar as the local currency closed at average of N318/ USD1 in the Bureau de Change, BDCs, while black market rates averaged N315/USD1 last weekend. The rate closed at N323/ USD1 previous weekend.

Some black market dealers, though not particularly sure what was going on, told Vanguard that patronage had significantly gone down for some time now, while their suppliers were willing to reduce their offer rates. But a market survey by Cowry Assets Management, a Lagos-based investment house, indicated that the development was connected to the planned currency swap deal between the Central Bank of Nigeria, CBN, and the Peoples Bank of China, PBOC. They also indicated that “other factors that influence the Naira gains were the anticipated increase in dollar supply from international oil companies and the Central Bank of Nigeria, to meet the demands of major importers of Premium Motor Spirit, PMS.” The exchange rate remained steady at the official window and the interbank spot markets with ruling rates of N197/USD and N199.10/USD respectively. However, the interbank forwards market for most tenors show appreciation of the local currency.

The one month, three months, six months and 12 months tenor appreciated week-on-week by 0.32%, 1.46%, 3.10% and 1.35% to N200.93/USD, N204.17/USD, N209.09/USD and N221.14/USD respectively. Some bank officials who spoke with Vanguard, attributed the appreciation to a major dampening of speculative deals rather than any shift in real demand or supply of the currency.

They said, however, that the Naira would have appreciated by far more margin than what was recorded last week but for some conflicting and incomplete information that came from government officials on the currency swap. According to them, while the CBN governor, Godwin Emefiele, was quoted as saying the CBN was discussing with the PBOC on a currency swap and that an agreement had been reached with the Industrial and Commercial Bank of China to act as Nigeria’s agent or clearing bank when the swap transaction with the PBOC was concluded, a statement attributed to the Foreign Affairs Minister, Mr Geoffrey Onyeama, said the deal was not a swap, created some confusions.

The appreciation trend during the week showed that Naira had appreciated significantly from N323/ USD1 previous week to about N316/ USD1 by Tuesday, but retreated to N320/ USD1 the next day, apparently, following the conflicting information. However, the comments by the Minister of Finance, Mrs. Kemi Adeosun, at the World Bank meeting in Washington, United States, that same day may have led to a rebound that brought the closing rate to below N315. 11 0 0 0