CBN adjusts forex peg as naira hits 228

CBN Governor, Mr. Godwin Emefiele

The Central Bank of Nigeria on Tuesday lowered the naira peg to 196.95 against the dollar from 196.90 it set last week.

This made it the fourth time the CBN had adjusted the peg since it was introduced in February, Reuters reported.

This happened just as the naira tumbled further to 228 against the dollar at the parallel market on Tuesday from 265 on Monday.

Reuters reported that the yield on the Federal Government’s 2024 bond in the JP Morgan Government Bond Index rose by 40 basis point to 14.74 per cent.

Traders said the move might indicate that the bank was beginning to think about how to loosen its currency regime.

“There is no change to FX policy, therefore the locals are getting a bit nervous thinking that offshore investors will not be coming back any time soon,” Portfolio Manager at Aberdeen Asset Management, Mr. Kevin Daly, said.

“Effectively, the bond market is starting to price in a much wider move on the currency,” he said.

Traders had said on Monday that the negative outlook for inflation, which is hovering around the central bank’s upper limit of nine per cent, was one reason local investors were selling bonds.

The most liquid five-year bond yield rose to 14.95 per cent, up from 14.71 per cent the day before the central bank unveiled the currency rules last week, but below 15.5 per cent on the eve of the presidential election in March.

Experts and analysts had said the naira might hit 230 in coming weeks following the CBN new forex rule.

Currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, had said the owing to the huge demand at the parallel market, the naira would experience severe pressure in coming weeks.