Pressure on Naira persists as CBN keeps rates unchanged
by HOPE MOSES-ASHIKE
September 21, 2016 | 12:50 am| | | Start Conversation
The pressure on the nation’s currency continued yesterday after the Central Bank of Nigeria (CBN) kept key monetary rates unchanged.
The Monetary Policy Committee (MPC) members yesterday voted to retain the MPR at 14.00 per cent; the CRR at 22.5 per cent; the Liquidity Ratio at 30.00 per cent; the Asymmetric Window at +200 and -500 basis points around the MPR.
After trading on Tuesday, naira lost N2.48k against the US dollar as it closed at N309.83k, about 81 percent compared to N307.35k the previous day at the inter-bank spot market.
At the Bureaux De Change (BDC) segment of the foreign exchange market, and the parallel market, the local currency weakened by N1.00k or 0.25k each. It closed at N423 yesterday as against N422 on Monday at the BDC segment while it closed at N424 yesterday at parallel market from N425 the previous day, BusinessDay findings show.
“We believe that the retention of the status quo was broadly in line with market expectation, and as such, we do not expect significant changes in the course of the financial markets. However, we expect the margin between the interbank and the parallel FX market segments to remain elevated given the impact of low oil earnings and the restriction of some items from the official market segment”, Olutola Oni, analysts at WSTC Financial Services said in an emailed response to BusinessDay.
He said despite the presence of cost-push inflationary pressure and the crowding out effect of high policy rate, we believe that the preference for FX stability and the need to maintain consistency in policy pronouncements informed the decision of the MPC. Although the potential upward pressure from volatility in the FX market still requires policy attention, “we however believe that a reversal of the current restrictive policy stance of the CBN should occur in the near term. Our opinion is hinged upon the imperative need to stimulate growth, consistent month-on-month moderation in inflationary pressure across all measures of inflation and expected inflows from foreign borrowings”, Oni added.
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