The ongoing elections into various offices in the country is keeping pressure on the naira as politicians keep soaking up foreign currencies in the market. There are, however, indications that naira could begin to appreciate if presidential election is held to be credible and violence-free, with foreign investors likely to view a victory by incumbent President Goodluck Jonathan as a sign of stability. Indicators show that dollar demand has been persistently high in the run-up to the elections in the country, as businesses and wealthy Nigerians take long dollar positions to hedge against the risk of instability around the polls.
National Assembly polls penultimate Saturday, though marred by localised violence and isolated allegations of fraud, were generally deemed to have been among the most credible in decades. A similar outcome on Saturday would boost confidence. “There is a significant disconnect between risk sentiment onshore and offshore,” said Samir Gadio, an official of Standard Bank of South Africa, who also added that it is likely the naira will appreciate in the coming weeks. The naira was trading at N155.05 to the dollar early last Thursday, stronger than the N155.20 at Wednesday’s close. The Central Bank of Nigeria (CBN) sold $300 million at N152.58 a dollar at its bi-weekly foreign exchange auction on Wednesday, below demand of $444 million. More is at stake in the presidential election than the parliamentary polls, and while the indications so far point to a relatively calm vote, violence or prolonged legal challenges to the outcome could spook the market, traders said. “It is not predictable how the naira will trade next week. It depends on the outcome of Saturday’s election,” one currency dealer in the commercial capital Lagos said.
National Assembly polls penultimate Saturday, though marred by localised violence and isolated allegations of fraud, were generally deemed to have been among the most credible in decades. A similar outcome on Saturday would boost confidence. “There is a significant disconnect between risk sentiment onshore and offshore,” said Samir Gadio, an official of Standard Bank of South Africa, who also added that it is likely the naira will appreciate in the coming weeks. The naira was trading at N155.05 to the dollar early last Thursday, stronger than the N155.20 at Wednesday’s close. The Central Bank of Nigeria (CBN) sold $300 million at N152.58 a dollar at its bi-weekly foreign exchange auction on Wednesday, below demand of $444 million. More is at stake in the presidential election than the parliamentary polls, and while the indications so far point to a relatively calm vote, violence or prolonged legal challenges to the outcome could spook the market, traders said. “It is not predictable how the naira will trade next week. It depends on the outcome of Saturday’s election,” one currency dealer in the commercial capital Lagos said.
