0 CBN ADJUSTS EXCHANGE RATE SLIGHTLY

The Central Bank of Nigeria on made a slight adjustment to its naira-dollar exchange rate peg, 

The bank adjusted the rate at which it sold the United States dollar from N197 to N196.95,Reuters reports.

Prior to This action, the rate had been oscillating between N197 and N199 for a few months.

The naira had traded on thin volumes at 198.95 to the dollar on the interbank market on, before two large sales totalling $36.4m were done at N196.95 towards the close of the forex market, foreign exchange dealers said.

 The naira is trading between 215 and 218 against the dollar at the parallel market.

 An economist said the move might suggest that the bank was testing out the market to see whether it was ready for a looser currency regime.

“Small changes in the rate could possibly allow the central bank to gauge the changes in demand and supply dynamics, which will inform decisions on when and how best to start lifting forex restrictions,” an analyst at South Africa’s NKC Independent Economists, Cobus de Hart, said.

The CBN, however, described the rate movement as a simple reflection of the state of dollar supply in the market.

According to the CBN spokesman, Ibrahim Muazu “We are not fixing rates. The present rate is a reflection of the level of dollar supply in the market,” 

Head, Investment and Research, Afrinvest West Africa Limited, an investment research and advisory firm, Mr. Ayodeji Ebo, said the CBN’s action might be linked to the relatively reduced pressure on the external reserves.

“It is a rate adjustment but it is too small to be called a revaluation. The adjustment is too small to cause any pressure on the naira. The CBN feels the action will not affect its defence of the naira,” he said.

Currently the nation’s external reserves had fallen to $29.4bn as of June 2, down 20.1 per cent from a year ago as the central bank burns cash to defend the local currency.

The naira has lost 8.5 per cent of its value since the start of the year after sharp falls in the price of oil. That forced the central bank into a de facto devaluation and fixing of the exchange rate in February in order to protect its dwindling foreign reserves.

The regulator also banned commercial lenders from re-selling central bank dollars among themselves, which was an attempt to curb speculation on the naira.