President Goodluck Jonathan
As President Goodluck Jonathan is set to present the 2013 budget to the National Assembly on Thursday, financial experts have raised the prospects of a stable naira next year.
In a report titled, Postcard from Nigeria released last week, analysts from the international financial advisory firm, Renaissance Capital, said “The exchange rate assumption for the 2013 budget (which stands at N160/$1, which are also our YE12 projection) indicates a stable naira in 2013.
“We think the CBN’s preference is for a stable and strong naira, partly to give investors a real return.”
The analysts who anchored their optimism on the outcome of their recent interactions with policy makers in Nigeria said, “Increased confidence in the naira will improve capital inflows, which we believe is the MPC’s intention, and bring down yields, thus encouraging lending. We believe the drop in yields since August is a significant step towards strengthening credit.”
Rencap said it believed the CBN’s July decision to tighten liquidity would support credit growth. “CBN officials we met were happy with the effectiveness of their liquidity tightening measures – the naira has appreciated by c. 2% since the policy change. The naira was also supported by higher capital inflows and a recovery in oil prices, which we expect to remain firm.”
Meanwhile, the naira appreciated at both the interbank market and the Wholesale Dutch Auction System (WDAS) last week due to a drop in the demand for the dollar.
At the interbank, the local currency advanced slightly by 10 kobo to close at N157.25 to a dollar Wednesday, higher than the N157.35 to a dollar it attained on Tuesday.
On the other hand, at the first session of the bi-weekly auction held last week, the naira leapt by one kobo to close at N155.77 to a dollar, as against the N155.78 to a dollar it closed last week Wednesday.
Whereas the apex bank offered a total of $200 million to the 13 dealers that participated at the auction, only $178 million was sold.
The CBN had offered a total of $200 million last week Wednesday.
Dealers, however, said the supply of $61 million by Chevron to some banks also supported dollar liquidity in the market and provided support for the naira.