Post-CRR Effect: Naira Weakens to 20 Months Low 

The naira weakened to an almost two year low  (20 months) of N163 to the dollar at the inter-bank market in August after the Central Bank of Nigeria (CBN) reviewed its policy on Cash Reserve Ratio (CRR).
Before the policy, the local currency exchanged N159 to the dollar.
Interbank interest rates  also spiked to 21 percent before stabilising at an average of 15 percent by the end of August.
Bismarck Rewane, chief executive of Financial Derivatives CompNy (FDC) in his September report explained that the misfortune of the naira was fueled by increased demand for dollars by corporates.
“Withdrawal of funds from emerging markets in response to the proposed tapering of US bonds.
“Approximately $40bn has been withdrawn from emerging markets within the first half of 2013.
The country’s foreign reserves currently stand at $46.6 billion due to renewed pressure on the exchange rate.
Rewane however said that the impact of CRR is expected to wear off completely by third quarter of 2013.
He sId monetary policy stance is expected to remain contractionary in September when the MPC meets.

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