The certainty of the direction of the naira is hardly determined easily. Two weeks ago, the local currency stood up against the United States dollar boldly, claiming back some vital points.
During the period the gap between parallel and official markets rates converged reasonably, thus reducing the opportunity to speculate. But sources said the sudden scarcity of fuel in some major cities may be a ploy by petroleum product marketers for government and Nigerians to let business be as usual. That will again pile pressure on the naira.
For instance, after the popular subsidy removal and the attendant probe by the House of Assembly, the value of the naira appreciated 30 kobo or nearly 0.2 per cent from N156.7 to N156.4 in about two weeks in February.
Bismarck Rewane, Chief Executive of Financioal Derivatives Comapny (FDC) Limited agrees with the robust forex market during the month.
Rewane said there was a decline in exchange rate volatility in the first half of February even as the naira appreciated by 0.2 per cent in the spot market. At the other Forex market segments, the naira has also gained in value against the dollar by 1.43 per cent and 0.60 per cent in both the inter-bank and parallel markets.
The sale of dollars by the oil majors such as the Nigerian National Petroleum Corporation (NNPC) and Shell amongst others have played a significant role in reducing the demand pressure on dollars as these companies activities have increased the liquidity stance of the markets.
On February 22, the local currency hit an eight-month high against the dollar at the inter-bank market. Some analysts attributed part of the naira success to the reduced demand from companies importing fuel.
Currently, many fuel stations in Lagos are under lock and key with no reason for the perceived scarcity.
But there are fears that as oil dollars dry up in the market and fuel importing companies ‘blackmailing’ government and Nigerians by gradually allowing queues to resurface in petrol stations continued to be witnessed in major cities of the country, the forex market may again be under pressure.
The fears are heightened with the unwritten knowledge that no matter the pressure, the Central Bank of Nigeria (CBN) will not want to breach a below $30 billion foreign reserves, the equivalent of about seven months? import cover.
According to Rnaissance Capital, the fact that reserves have fluctuated between $31-35bn Year-to-Date (YtD), but the central bank has not let them fall below $30 billion, is a pointer that the $30 billion mark is the sacred level it must fall below.