Rewane however noted that owing to the commitment of the Central Bank of Nigeria (CBN) to continue to defend the naira, and the expected huge liquidity injection of N866 billion from maturing AMCON bonds, the external reserves would experience further decline in October.
The decline in the nation’s external reserve and naira depreciation in the interbank foreign exchange market will persist this month, said Bismarck Rewane, Managing Director/Chief Executive, Financial Derivatives Company. He made this prediction in his month Economic News and Views presented at the Lagos Business School. According to the daily market liquidity report obtained by Vanguard, excess liquidity (or idle funds) in the interbank market opened the week at N563.85 billion, rose to N611 billion on Tuesday, before dropping to N566 billion on Thursday and N560.9 billion on Friday. Rewane noted that the surge in domestic liquidity due to the AMCON bonds, and increased electioneering spending, would increase the pressure on the nation’s currency-the naira, leading to further depreciation in the interbank foreign exchange market, with the rate rising to N165 per dollar from N163.7 per dollar last month. “The naira has lost one percent at the interbank in the last month. Currency pressure is likely to worsen due to weaker oil earnings, imminent U.S rate hike and domestic liquidity pressures,” he said. Predicting a further increase in inflation for September to 8.39 percent from 8.3 in August, Rewane said that there would be increased liquidity mop up by the CBN, in order to combat the surge in domestic money supply occasioned by the above factors. “The CBN will likely increase Cash Reserve Ratio (CRR) on private sector deposits in November. There will be more frequent and larger OMO interventions in October”, he said. It would be recalled that despite the effort of the CBN to mop up liquidity in the banking system, the amount of idle cash remained high closing at N560 last week.
No comments:
Post a Comment