As the Monetary Policy Committee, MPC of the Central Bank of Nigeria CBN, commences its 245th meeting on Thursday, July 23, it is expected to take critical decisions that would determine the fate of the naira, which has been under intense pressure at the parallel market for sometime now.
The MPC, which has operational independence in determining monetary policy will be meeting for the fourth time this year in Abuja. The naira, which sells for N196.95 to a dollar on the interbank market, goes for about N240 to a dollar at parallel market points across major cities in the country.
The pressure faced by the naira at the parallel market was provoked by the CBN’s restriction of importers of 41 products from accessing forex at the official foreign exchange market.
The depreciation of the naira had heightened the debate on the devaluation of the naira. While the central bank has maintained that its decision not to undertake a further devaluation of the naira was as a result of the need to safeguard the Nigerian economy from the shocks and negative impact this would have on the economy, some analysts and agencies have intensified their call for the devaluation of the nation’s currency.
However, analysts at Financial Derivatives Company Limited, FDC anticipated that the CBN will increase use of administrative measures in its quest to protect the nation’s currency.
“Even though the CBN is committed to defending the naira, the currency pressures facing Nigeria are becoming more intense. The spread between the interbank rate and the parallel market creates an arbitrage corridor for speculators, and is now a round tripper’s paradise. Another issue that is of concern is the consistent decline in oil receipts as a result of falling oil prices, when the sanctions on Iran are finally removed,” it stated.