*Predicts further gains below N1,000/$
*Currency sustains gains, now N1142/$1 on official FX window, N1150/$1 on parallel market
James Emejo and Nume Ekeghe with agency report
Goldman Sachs Group, yesterday said the Naira has already established itself as the top-performing currency globally in April, adding that the local currency was expected to extend its gains, amid the continuing effective policy management by the Central Bank of Nigeria (CBN).
In April alone, the Naira has surged 12 per cent against the dollar, adding to a one per cent increase in March, according to Bloomberg.
The rally was supported by capital inflows and consecutive interest rate hikes, helping to recover from significant losses following two devaluations since last June, triggered by the the floating of the local currency and FX market unification.
Goldman Sachs economists, who previously forecasted in February that the Naira would strengthen to N1,200/$ in 2024, now anticipate it could surpass this level due to aggressive measures by the central bank, including a total of 600 basis points in interest rate increases during policy meetings in February and March.
In an interview with Bloomberg, an economist at Goldman Sachs, Andrew Matheny, hinted at the possibility of the naira surpassing this projection and trading even lower against the dollar.
Matheny said: “This probably can run further; we would see an extension of the move to N1,000 and maybe even sub-N1,000.”
He noted that since Goldman’s February forecast, “six weeks have gone by and they’re continuing to hold the line, so that’s encouraging.”
Goldman Sachs’ optimistic forecast aligned with the sustained rally of the naira observed across both the parallel and official segments of the foreign exchange market.
Notably, the naira has demonstrated significant strength against the dollar, reaching notable milestones in recent trading sessions.
At the Nigerian Autonomous Foreign Exchange (NAFEM) window, the naira closed at N1,142.38 per dollar yesterday, compared to the N1,230.61 per dollar it was on Monday.
The upward movement signified an impressive appreciation of N88.23 within a short period.
On the parallel market, the naira continued its upward trend, closing yesterday at N1,150 per dollar, compared to N1,240 per dollar on Monday. This surge reflected a remarkable appreciation of N90 over just three days during the public holidays.
The daily turnover on the official FX window saw an increase of 124.71 per cent, reaching $281.34 million yesterday, compared to the $125.55 million recorded on Monday.
Furthermore, the highest spot rate observed yesterday stood at N1,265, with the lowest spot rate recorded at N1,100.
The Monetary Policy Committee (MPC) of the CBN recently, at its last meeting in March, raised the Monetary Policy Rate (MPR), the benchmark interest rate by 200 basis points to 24.75 per cent from 22.75 per cent. The bank also reversed the asymmetric corridor around the MPR from +100/-700 basis points to +100/-300 basis points.
While the CBN retained the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) at 45.0 per cent, it however, jerked up the CRR of Merchant Banks (MBs) from 10 per cent to 14 per cent, and left the Liquidity Ratio (LR) unchanged at 30.0 per cent.
Also, during its February 27, 2024 meeting, the first to be chaired by Cardoso, the apex bank had jolted the markets and beat analysts’ expectations when in one fell swoop, it raised the Monetary Policy Rate (MPR) by a whopping 400- basis points to 22.75 per cent from 18.75 per cent – at a period of biting economic hardship occasioned mainly by the removal of fuel subsidy and floating of the Naira.
The bank had also adjusted the asymmetric corridor around the MPR to +100/-700 basis points from +100/-300 basis points, and further raised the CRR of DMBs to 45 per cent from 32.5 per cent as well as retained LR at 30 per cent.
These initiatives have alleviated the local dollar shortage, reducing volatility and the reliance on parallel markets.
President Bola Tinubu’s bold leadership and decisive reforms have birthed the current economic resurgence.
The reforms have laid a strong foundation for sustainable growth and stability, showcasing Tinubu’s commitment to addressing long-standing economic challenges and steering the country towards a prosperous future.
