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Bismarck Rewane forecasts respite for naira at N470/$ in parallel market by July



Rewane says regulating FinTech a clampdown on corporate innovation

Bismarck Rewane forecasts respite naira at N470/$ in parallel market by July



Chief Executive Officer (CEO), Financial Derivatives Company Ltd (FDC), Mr. Bismarck Rewane, has predicted that the local currency will appreciate to N490/$1 this month.

As concerns mount over the continued decline in the value of naira against major currencies, he also forecast that the “parallel market rate will oscillate between N470/$ and N490/$ in July.”

The FDC boss stated this in his June 2021 Lagos Business School (LBS) Executive Breakfast Session presentation, made available to Business Metrics.

Naira, which has been on a free fall on the parallel market in the wake of the Central Bank of Nigeria (CBN)’s adoption of the Investors and Exporters’ (I&E)-NAFEX- rate as the official rate on May 24, fell to N502 per dollar last Friday, compared with N485/$1 a fortnight ago

According to Rewane, naira’s sharp decline on the parallel market is due to “panic buying, speculative trading, forex rationing and front loading of demand.”

He, however, stated that “after the speculative trading and panic buying, naira should appreciate,” adding that the local currency would “appreciate in the parallel market to N490/$ and) crawl up to N412/$- N415/$ at the I&E window.

He predicted that naira would be bolstered by CBN increasing its intervention in the forex market by $1 billion, as well as high oil price ($70pb) and increased oil production in July.

Rewane, who welcomed CBN’s adoption of NAFEX rate as the official rate, said the move indicated that the apex bank was moving towards exchange rate convergence, adding that it also meant that “forex transactions (are) now strictly system generated- not on mobile phones.”

Furthermore, he noted that CBN’s adoption of NAFEX rate would lead to the creation of “a more transparent price discovery and settlement system.”

The FDC CEO, who is also a member of President Muhammadu Buhari’s Economic Advisory Council, pointed out that CBN’s adoption of NAFEX rate as the official rate would boost government revenue. Rewane said he expected convergence around the I&E rate to continue, thus “further reducing the parallel market premium.”

Reacting to CBN’s “Naira- 4-dollar” promo, which the regulator introduced in its bid to boost remittance inflows, Rewane predicted that the scheme would have a “muted” impact on the external reserves in the near term.

He said: “CBN will continue to clear its forex demand backlog to Foreign Portfolio Investors (FPIs). Gross external reserves likely to fall towards $32 billion.

He noted, however, that higher oil price ($70pb) will buoy naira and reserves.”

In a report last week, analysts at FBNQuest Research said that they were not “convinced” by CBN’s pledge to adopt market-determined foreign exchange rates.

According to them, “CBN has moved close to unification of rates and may well complete the exercise in the months ahead.

“We are less convince by its pledge to adopt ‘marketdetermined’ fx rates because of its preference for managing and administering the market.

“The government’s rate is now the NAFEX rate, which it does not set but which it can guide, being a core supplier of dollars (particularly when the foreign portfolio investors (FPIs) are not tempted by the returns).

“We, therefore, see a slow downward trend for the naira under the guidance of the CBN.”

Meanwhile, the Association of Bureau De Change Operators of Nigeria (ABCON) had last week attributed high exchange rate in the parallel market to the activities of unlicensed operators on the street while it threatened punishment against themit threatened punishment against them.

President of the association, Alhaji Aminu Gwadabe said in a statement that it would punish errant members, disclosing that its compliance officers and staff would soon commence nationwide supervision of BDC operations.

In April, ABCON had called on CBN to review the transaction margin for BDCs above the current N2 per dollar to enable its members sustain their businesses.

The BDCs buy dollars from CBN at N390/$1 and are expected to sell to end users at not more than N392/$1, representing N2 commission per transaction.

ABCON had also, in the recent statement, advised foreign exchange users and the general public to patronise only BDC operators licensed by CBN in order to get dollars at the approved rate.

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