Two financial houses have lauded the flexible exchange rate policy adopted by the CBN, saying it would boost forex liquidity and stabilise the Naira.
In two separate statements obtained by Economic Confidential Vetival Capital Management Ltd. and Cowry Asset Management Ltd., both in Lagos, said the development indicated CBN’s acceptance of market realities.
They also said that the decision would lead to increased dollar inflow in few days.
It would be recalled that the Monetary Policy Committee (MPC) in its 107th meeting in Abuja voted to adopt a flexible foreign exchange policy.
It also retained Monetary Policy Rate (MPR) at 12 per cent, Cash Reserve Ratio (CRR) at 22.5 per cent and liquidity ratio at 30 per cent.
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Mr Pebina Yinkere, Head, Research, Vetival Capital Management Ltd. was quoted as saying that the policy would curb profiteering in the system.
Yinkere also said that the policy would improve foreign exchange liquidity in the system.
“Overall, we view this development as positive for Nigeria,” Yinkere added.
Cowry Asset Management Ltd. said the policy would impact on the economy in several ways.
It said it expected the current inflationary pressure to continue unrestrained as budgetary disbursement commences.
According to the firm, interest rate is expected to continue to hover at current levels with an increased double digit outlook.
“This is likely to increase in liquidity mop-up through Open Market Operations (OMO) in response to expected increase in budgetary spending.
“The Naira might remain under pressure as market forces adjust to a more realistic parallel market rate.
“The decision would likely attract foreign exchange inflows estimated at 20 billion dollars from domiciliary accounts as currency exchange risk minimises,” it said.
It added that capital market activities would witness gradual recovery as foreign exchange risk diminishes.
