The financial markets displayed contrasting behaviors just one day after the Central Bank of Nigeria, CBN, reinstated the 43 previously excluded items into its foreign exchange supply window.
In the Investors and Exporters (I&E) foreign exchange market, the local currency closed trading at N764.51/$1.0, down from the previous day’s N759.20/$1.0. In the parallel market, the local currency depreciated to N1045/$1.00 from N1043/$1.00.
Conversely, the stock market indicated improved confidence in the economy due to the CBN’s policy change, resulting in a 10 base point rise in the All Shares Index (ASI) to 67,200.69, the highest level since September 22, 2023.
Analysts at Cardinal Stone Finance suggested that the positive market sentiment stems from the CBN’s actions in lifting restrictions on previously restricted items and emphasizing its commitment to enhancing FX liquidity. However, they emphasized the need for FX supply to improve in the I&E window to ensure the policy’s effectiveness.
Meristem Securities Limited analysts noted that while the policy aims to alleviate FX pressure and curb parallel market arbitrage, its immediate impact may be limited due to constrained FX inflows.
Dr. Muda Yusuf, an economist and Director at the Centre for the Promotion of Private Enterprise (CPPE), praised the CBN’s decision to lift the ban on the official sale of foreign exchange for 43 items, considering it a positive step that addresses distortions in the forex market.
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