Pressures on naira likely to persist, says FDC
Pressures on the naira at the parallel market as well as the investors’ and exporters’ window are likely to persist in the near term, Financial Derivatives Company Limited has said
The FDC analysts, led by renowned economist Mr Bismarck Rewane, said this could further stoke inflationary pressures on domestic commodities.
“Currency depreciation will increase the cost of imports and in turn increase the price of imported goods in the near term,” they said in their latest bi-monthly economic update.
According to the analysts, the Nigerian forex market is segmented with multiple exchange rates, and the most important rate being that of the I&E window.
“No less than 55-60 percent of Nigerian forex transactions are traded at this window. The CBN and most exporters and investors use this window. It serves as not only a source of price discovery but also a barometer for measuring potential and actual CBN intervention in the market,” they said.
FDC noted that the naira traded flat at N480/$ in February before depreciating by 0.42 percent to close at N482/$ on February 26.
At the interbank market, the currency traded flat at N379/$ to close the period in February.
It said, “The naira lost 0.71 percent at the investors and exporters’ window to close at N410.25/$ on February 26 from N394/$ at the beginning of the month. This was due to demand pressures for the dollar at the IEFEX market.
“So far in March, the exchange rates at the parallel market and IEFX window have lost 0.62 percent and 0.19 percent to N485/$ and N410/$ respectively as at March 12.”
