Lukman Otunuga, research analyst at FXTM, says the international community and local investors are still nursing “elevated expectations” that the central bank (CBN) will fix Nigeria’s multiple exchange rates.
Speaking on the decision of the bank to keep monetary policies unchanged, Otunuga said it “should be no surprise especially when factoring how the nation is in the process of a critical structural transformation”.
“Although the lingering fears decelerating economic growth and concerns over surging prices have partially attributed to the Central Bank’s passive stance, the overall sentiment towards the nation continues to display early signs of improvement.
“Some optimism exists over the nation’s recovery, with Nigeria’s inflation declining for the first timein 15 months in February and the noticeable increase in Dollar sales for importers bolstering the Naira on the black market exchange.
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“If economic data continues to follow a positive path in the longer term and inflation cools then there is a possibility of the Central Bank cutting interest rates to stimulate growth.”
Speaking on the prevailing exchange rate regime and the recovery of the naira, Otunuga said there are questions over the sustainability of the CBN intervention.
“On the foreign exchange front, the Naira was boosted on the black market this week after the Central Bank of Nigeria offered another $180 million to meet bids for forwards,” he said.
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“While the repeated injections of Dollars in the foreign exchange may buoy the Naira, questions may be raised over the sustainability of this method.
“With the multiple exchanges still a cause for concern that the needs to be dealt with, expectations remain elevated over the CBN taking further steps to fully bridge the gap, ultimately creating one equilibrium currency exchange.”
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