• I don’t believe in Naira devaluation, says Buhari
• How Naira-settled OTC will control excess cash
The travails of the naira have continued with the national Currency losing 49 kobo yesterday, exchanging for N281.49, as the Central Bank of Nigeria intervened with an undisclosed amount in the $32 million dollar trade volume, helping the local unit to withstand pressure.
But, even at that, and in the face of the ongoing implementation of the flexible policy which has systematically devalued the nation’s currency, President Muhammadu Buhari insists he does not see any benefit that the country can derive from devaluation of the Naira.
Buhari who restated his belief in the vigorous return to agriculture and solid mineral resources as some of the only means the nation’s economy could get quick breather made the disclosure at the traditional breaking of fast dinner he had with business community last night at the Presidential Villa, Abuja.
In line with his belief in agriculture as holding the key to the nation’s growth, the President said his long discussion with the Minister of Agriculture, had revealed that 13 states had the capacity to produce rice that would feed the nation within 18 months.
Buhari said on assumption of office, he had asked the Central Bank of Nigeria governor, Godwin Emefiele to supply him with details of the nation’s imports since 1999-2013/14 with billion of dollars. He said, “I don’t like the returns I get from the CBN because they are virtually things from tomato purée, rice wheat and other gadgets all of them without exceptions see things that Nigeria can produce, and even export.
“That is coupled with the demand that we should devalue the Naira. In August 1985 when the naria was N1.3 to a dollar now you need N300 or N350 to a dollar. What do we derive from that, how much benefit can we derive from this ruthless devaluation of the Naira.”
The nation’s legal tender had ended last week at N281 per dollar, a development analysts said it is a self-adjustment by the local currency.
However, the first liquidity flow from the autonomous sources- oil companies, is eagerly anticipated, with traders describing it as “substantial currency flows”, which would mark the beginning of a fully liquid forex Market.
Meanwhile, as the Naira-settled Over-The-Counter (OTC) Foreign Exchange (FX) Futures market debuted yesterday, the Central Bank of Nigeria (CBN) has quietly instituted a framework to contain liquidity-induced attack on the Exchange Rate of the local currency.
It will assist the monetary authority in managing the volatility on the Foreign Exchange market, promoting stability and entrenching confidence in the market.
Also at the interbank market yesterday, the naira exchanged for N282.04 in seven-day forwards; N286.30, 14-day; N291.70, one month; N297.62, two months; N301.11, three months; N306.74, six months; and N317.83 for one year.
But there are still insinuations that currency traders are playing cautiously to find the fair value of the naira before participating fully in the market.
A top CBN official told The Guardian: “If you have demand, tender it. Most people who go about saying negative things do not even have the naira to back up their demand.
“CBN has been saying it and I say it again that if you have demand, tender it. Those who tender their demand are actually getting foreign exchange, while those who want it for future use are being settled in the futures window,” the official disclosed.
Similarly, the interbank lending rates resurged yesterday to 28 per cent and 32 per cent from 19.2 per cent and 21.2 per cent it closed at the weekend for the Open Buy Back (OBB) and Overnight respectively.
Since last week, CBN has mopped up over N1.6 trillion with its $3.5 billion forwards trading under the new flexible exchange rate policy and daily interventions for six consecutive days.
The Naira-settled OTC Future are non-deliverable forwards where by parties to a contract agree to an exchange rate for a predetermined date in the future, without the obligation to deliver the underlying dollars on maturity, but only required to settle exchange rate differentials in Naira.
Emefiele, who was represented by the Special Adviser, Financial Market, Emmanuel Ukeje, at the unveiling of OTC said the “product is novel in Nigeria and it gives comfort regardless of the price at which you have quoted to buy foreign exchange in Nigeria.”
Prior to the take off of the new forex policy, banks’ treasurers called for persistent follow-up in mopping up excess money in circulation, estimated as a foil to speculative attack on Naira, which may arise from excess cash in circulation.
Specifically, the development would see the currency traders back up their demand with cash in local unit, hence removing the particular amount in circulation.
The Naira-settled futures, which started yesterday, offered transactions in one, two, three, six, nine, 12, 18 and months contracts at effective exchange rate agreed by the contracting parties.
The Managing Director of FMDQ, Bola Onadeko, urged the regulators of the financial markets to strive for the success of this new forex initiative by ensuring desired liquidity.
“The availability of the OTC FX Futures will improve the business planning practice of end-users and FX sellers, as the future exchange rate is guaranteed through the OTC FX Futures.”