Thursday, September 21, 2017/10:00 AM/ FBNQuest Research
Our chart captures exchange-rate movements over the past two years, marked initially by the fx scarcity triggered by the oil price slide in mid-2014. The differential between the rates (official and bureaux de change) initially narrowed with the liberalization of June 2016 that was not to be, but widened again until the CBN’s adoption of what we might loosely term multiple currency practices (MCP) in March.
The potential game-changer has been the investors’ and exporters’ fx window (NAFEX). The local media no longer routinely quotes parallel rates from a well-known website.
The IMF’s Annual report on exchange arrangements and exchange restrictions for 2016 shows Nigeria among countries said to operate a stabilized arrangement with a monetary aggregate target. The footnotes add that it had a de facto exchange-rate anchor with the USD.
We have since moved on in the sense that the CBN operates MCP including NAFEX.
The monetary authorities have a spring in their collective step. They can legitimately point to the upward trend in reserves despite the CBN’s supply to its fx windows, the rise in manufacturing PMIs and the contentment of retail with much improved access to fx for invisibles.
If we are looking for negatives, we single out the potential for abuse of MCP and anecdotal evidence that some investors will stay away because of them.
Taking a pragmatic view, the CBN is under limited domestic pressure to change tack. Portfolio investors can argue that the adjustment has already happened because they cannot trade fx at the official rate of N306.
1. Naira Depreciated To N370-$ Mid-August in the Parallel Market
2. Forex: CBN Goes Tough on Banks; Floods Market With $545m
3. CBN Injects Another $250m Into The Forex Market
4. Naira Faces Fresh Test at Parallel End
5. Nigeria’s Foreign Exchange Dilemma
6. The IFEX Window Now a Major Indicator of Value?
7. Foreign Investors Boost Foreign Exchange Supply
8. South Africa – Zar - Rally Nearing Its End
9. USD/JPY ranges around the 108.840 support level, Jackson Hole symposium in focus
10. The Gains of Investors’ and Exporters’ FX Window
11. Foreign Exchange Gains and Losses - Tax Treatment