Surprise rate cut stuns the Naira

This picture taken on January 29, 2016 in Lagos shows 1000 naira banknotes, Nigeria's currency. Nigeria's central bank governor, Godwin Emefiele, on January 26 dismissed calls to devalue the naira in his monetary policy committee statement. Instead he chose to continue propping up the currency at 197-199 naira to the dollar and maintain foreign-exchange restrictions. As a result, the naira on the black market is hovering around a record low of 305, fuelling complaints from domestic and foreign businesses who can't access dollars required for imports. / AFP / PIUS UTOMI EKPEI (Photo credit should read PIUS UTOMI EKPEI/AFP/Getty Images)
The Naira came under more pressure in the parallel market, trading at 467 against the dollar, after the Central Bank of Nigeria (CBN) cut interest rates by 100 bps to 11.5%, in a surprise move aimed at stimulating the recovery after the drop in oil prices at the start of the year and the effects of the coronavirus.
A memo shared with the
banks signaling the growing scarcity of dollars in the market, suggests the possibility of further restrictions to limit currency purchases, as sales by Bureau de Change are clearly insufficient to meet demand.
“With such restrictions on the horizon, we expect the Naira to be lower and some stability in the near term,” says the weekly analysis from AZA, the leading non-bank pan-African currency supply platform.


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