Citing the Central Bank of Nigeria’s (CBN) plan to settle February 24 Non-Deliverable Forwards (NDFs) at N412.14 on the official market, analysts at leading provider of currency trading solutions, AZA, have predicted that the naira will depreciate to N490 per dollar on the parallel market.
The NDF is an indicator of the direction of the exchange rate in the future and is often referenced against the spot rate of the exchange rate between the naira and the dollar. In a note obtained by Saturday Telegraph, the AZA analysts stated: “After a relatively stable week in which the naira traded on the parallel market in the range of 467 to 480 against the dollar, we are now expecting depreciation towards 490.
“The Central Bank of Nigeria plans to settle February 24 Non-Deliverable Forwards (NDFs) at 412.14 on the official market. This represents a four per cent devaluation compared with 395 per dollar at the Investors and Exporters (I&E) window.
“Our outlook keeps in mind moves by the CBN aimed at stabilising the currency, including barring anyone with unrepatriated export proceeds pre-dating January 31 from accessing banking services. Markets have experienced a decline in speculative purchases of the greenback.
“On a macro level, gross external reserves inched up to $36.19 billion on February 1, providing some reassurance for longer term stability. The CBN has set a target of achieving $40 billion in external reserves, which should underpin the currency’s ‘key resistance level’ and boost foreign portfolio investment inflows.” Saturday Telegraph had reported yesterday that recent naira weakness on the Investors and Exporters’ (I&E) window was fuelling speculation of an imminent devaluation of the naira.
According to data obtained from FMDQ’s website the naira yesterday closed at N397.63 per dollar from an opening rate of N395.38/$1. On Wednesday, the local currency closed at N395.50 per dollar from an opening rate of N395.25/$1. Similarly, on Tuesday, the naira closed at N395 per dollar compared with N394/$1 on the previous day. However, in the last one week, the naira has been stable at N480/$1 on the parallel market.
– New Telegraph