- Operators attribute rate increases to the price increase.
The market reacted negatively to the Central Bank of Nigeria’s (CBN) decision to raise the Monetary Policy Rate (MPR) and Cash Reserve Requirement (CRR) to 15.5 percent and 32.5 percent, respectively. As a result, the value of the naira fell to an all-time low of N732 to the dollar on the parallel market. NewsReport gathered.
The Nigerian Exchange Limited’s market capitalization decreased by N112 billion as a result of shares of GTCO, Nestle, and UBA being sold off, contributing to a negative attitude on the country’s stock market (NGX).
The Naira had exchanged for N733 to a dollar at the parallel market on Wednesday but moves by the apex bank to mop up excess liquidity in the system despite the CBN insisting that the MPC recent decisions will stop the Naira from further depreciation proved abortive.
Speaking to newsmen during the Post Monetary Policy Meeting (MPC)-Facts behind the CBN’s decisions which was held via Zoom on Wednesday, the Director of Trade and Exchange Department, CBN, Dr. Ozoemena Nnaji, noted that the apex bank is doing its best to ramp up its policy on increasing supply of FX in the system.
“As long as we keep an increasing supply, we would continue to start seeing the narrowing of the gap. You also know that we have elections coming up and elections would require some kind of exchanges, but we are ramping up our supply and that’s what the central bank is doing so that supply can go up and the differential in rate will continue to narrow”, Nnaji said.
However, the surging strength of the US dollar is having adverse effects on Nigeria’s local currency. According to parallel market operators, the fall was due to dollar scarcity, which put pressure on the local currency.
“The CBN knowing fully well of what is happening to the economy decided to increase the interest rate. Were they expecting the dollar to reduce? Because what we are still seeing in the country is that there is a scarcity of FX. So with them constantly talking of policies to increase FX supply, it remains absent as far as I am concerned”, Abdullahi Ismail, a trader said.
It would be recalled that since the CBN discontinued the sale of forex to Bureau de Change (BDC) operators, the Naira has been on a steady decline.