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Budget 2013 Presents Hope for Naira

By on October 8, 2012

President Jonathan and CBN Governor, Sanusi

Financial experts have raised the prospects of a stronger and firm Naira next year, following the presentation of the 2013 budget by President Goodluck Jonathan to the National Assembly on Thursday.

This is contained in a report presented by Renaissance Capital, titled “Postcard from Nigeria” released last week.

Analysts from the international financial advisory firm said, “The exchange rate assumption for the 2013 budget (which stands at N160/$1, which are also our YE12 projection) indicates a stable naira in 2013.

“We think the CBN’s preference is for a stable and strong naira, partly to give investors a real return.”

Expressing their optimism derived from their current relations with policy makers in Nigeria, the analyts said “Increased confidence in the naira will improve capital inflows, which we believe is the MPC’s intention, and bring down yields, thus encouraging lending. We believe the drop in yields since August is a significant step towards strengthening credit.”

Commending the CBN’s July pronouncement to stiffen liquidity, Rencap said the move would sustain credit growth.

“CBN officials we met were happy with the effectiveness of their liquidity tightening measures – the naira has appreciated by c. 2% since the policy change. The naira was also supported by higher capital inflows and a recovery in oil prices, which we expect to remain firm.”

At both the interbank market as well as the Wholesale Dutch Auction System (WDAS) the past week, the naira appreciated following a drop in the demand for the dollar.

On Tuesday, the local currency closed at N157.35 to a dollar but lower on Wednesday with N157.25 to a dollar.

Last week Wednesday the CBN auctioned a total of $200 million

The support for the naira was because of Chevron’s supply of $61 million to some banks, which also supported liquidity in the market, according to dealers.