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Uncertainty persists as a mass exodus of investors
from the equity and bond markets shy away from
local assets amid fears of an imminent currency
devaluation.
Nigeria has had to contend with that setback,
worsened by the undesired macroeconomic effects of a
falling oil price.
“The Central Bank of Nigeria’s attempts to calm the
market have fallen on deaf ears. In fact, it has
created more uncertainty as a string of circulars
seemingly unnerved participants in the interbank
market, provoking a surge in demand as importers
bring forward their commitments,” Rand Merchant
Bank stated in its latest Global Markets update.
“Yesterday (Thursday) was a prime example of the
interbank market’s inability to absorb the rising level
of demand,” added the think-tank.
The Naira spiked to 172 toward the close of the day,
necessitating swift central bank intervention.
The unit eventually clawed its way back to 168,75
following the sale of an undisclosed amount of US
dollars by the CBN.
However, the central bank is limited in its ability to
directly influence the spot rate due to its dwindling
international reserve position.
“We have long held that an oil event, be it a drop in
the price or production, would demand an upward
adjustment of the reference rate. While conditions are
primed for a change, the upcoming presidential
elections might impact the timing of monetary policy
adjustments,” RMB stated.
The elections are due early next year.
Tensions have characterised the lead up to the polls.
The Vanguard
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