The newly proposed exchange rate band of N155/156 to a dollar by the Central Bank of Nigeria (CBN) would help in preserving Nigeria’s forex reserves, the Regional Head of Research, Africa Global Research, Standard Chartered Bank, Razia Khan, has said.

Khan who stated this in a note e-mailed to THISDAY Tuesday, also argued that the move by the apex bank would also help bridge the spread that had emerged between the official and interbank segments of the forex market.

The international financial market analyst made these remarks just as THISDAY checks showed that the naira dipped at both the parallel and Bureaux De Change (BDC) segments of the market yesterday.

THISDAY findings showed that the naira shed N1.50 to close at N161.50 at parallel market points visited at Marina Lagos yesterday, compared with the N160 to a dollar it went the previous day.

Similarly, at some BDCs in Lagos, the local currency hovered around N162/|$1 yesterday, from the region of N160/$1 it sold the previous day. However, the naira gained N1.72 against the dollar to close at N157.80/$1 at the interbank market yesterday, compared with the N159.52/$1 it closed on Monday.

Dealers attributed the decline of the naira against the greenback, to the CBN’s pronouncement.

CBN Governor, Mallam Sanusi Lamido Sanusi, had on Monday dropped the hint that the apex bank would review the exchange rate band of naira to the dollar from +/-3 per cent of N150/$1, to N155/N156.

Sanusi had said, “we’ll give it a few more days and see where it settles finally and then we’ve got to come out with a new transparent band. Both the midpoint and the band could change. The target exchange rate band would aim to maintain stability without putting your reserve position at risk.”

According to Khan, the adoption of the new mid-point  would see the acceptable trading range of the naira shift to N150.35 – N159.65 at the bi-weekly auctions, from the current position of N145.50-N154.50.

Commenting further, she said: “Confidence in the CBN’s ability to commit to the new mid-point will be key to forex market outcomes in the future. In our view, allowing the official forex rate to react to market conditions is a positive, suggesting that the exchange rate, rather than external reserves, will adjust to heightened demand for forex.”

Source: ThisDay/Obinna Chima