WSTC Financial Services envisages slide in naira value
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WSTC Financial Services Limited (WSTC), a dealing member of the Nigerian Stock Exchange (NSE), has envisaged a slide in the value of the naira as the 2015 general elections approaches.
This is following the prevalence of domestic uncertainties, weak economic fundamentals and impending increase in interest rates in the US. Meanwhile, analysts do not expect the downward pressure on the naira to subside within the forth quarter of 2014.
“We expect the continuous intervention by the CBN (to curtail the downward pressure on the value of the naira through dollar sales in its bi-weekly Retail Dutch Auction System) to be constrained by the slow down in the rate of accretion to the nation’s stock of foreign reserves. The anticipated slow down in the rate of foreign reserves accretion is premised upon our outlook of weak oil earnings resulting from falling crude oil prices and sub-optimum level of domestic oil production,” analysts at WSTC said.
The analysts noted that in order to stem leakages and to minimise exchange rate volatility, the CBN authorised a mandatory recapitalisation of firms operating in the bureau de change segment of the forex market, with an upward review of the minimum capital requirement for operation in the segment from N10 million to N35 million and also with the cautionary deposit of N3 million reviewed to N35 million.
It is important to note that this has subsequently contributed to the narrow spread between exchange rates in the bureau de change market and other segments of the Nigerian forex market.
The Naira commenced the year up beat as it appreciated by 1.51 percent to N158.78/$ on January 3, but plunged to a record low of N165.33/$ in February 2014, precipitated by the unprecedented suspension of the erstwhile CBN governor.
Despite sustained downward pressure on the Naira within the period as the market continued to react to anticipated socio-political uncertainties regarding the forth coming general elections and normalization of the US monetary policy, the loss in value of the Naira was curtailed predominantly by the CBN, through its bi- weekly intervention at the Retail Dutch Auction System.
The naira depreciated by 1.61 percent to close the third quarter at N163.8/$ at the interbank market segment.
Article Credit: Businessdayonline