STABILITY is gradually returning to the Nigerian money market following the decision by the Central Bank of Nigeria (CBN) to move towards a full free float of the naira leading to an increase in liquidity and rise in investor confidence.
Over the last year, the Nigerian financial market has been in a terrible state of turmoil with the value of the naira declining rapidly. In response to the crisis, the CBN decided to float the currency and CBN governor Godwin Emefiele organised a series of roadshows in the UK and US to woo investors.
This has resulted certain improvements in liquidity on the interbank spot FX market last week, which recorded a turnover of $196.14m, with an average daily volume of $39.23m between July 25 and 29. Market analysts confirmed that the improvement in turnover signalled growing liquidity in the official FX market on the back of increased investor confidence.
One bank treasurer said the average rate of the naira during five days of trading last week stood at N318.81 to the dollar. He added that it is noteworthy that the CBN’s contribution to the market was only 3% of the total volume that was traded.
Yesterday, the naira exchange rate appreciated marginally on the interbank market to N316.37 to the dollar, stronger than the N321.16 at which it closed last Friday. Analysts said they expected the naira to make more gains against the dollar on the interbank market, as bureau de change operators prepare to start trading FX over the next few days.
About the roadshow, another analyst said that the CBN governor Godwin Emefiele, and his team met with over 140 investors in London, 10 in Los Angeles, about 50 in Boston and close to 90 in New York, where they were all enthusiastic to receive the governor and other members of his team, given their interest in Nigeria. He added that with the clarity provided, they were more amenable and willing to resume trading in naira in a few weeks or months from now.