Political crisis: Naira gains on interbank market

Despite the current political up-heaval in the country over fuel subsidy removal and the Boko Haram menace, the naira strengthened for the second day on the interbank market segment of the foreign exchange market. The naira exchanged for N160.6 per dollar on Tuesday.It will be recalled that President Goodluck Jonathan declared a state of emergency in parts of four northern states on December 31, 2011 and set up a special counter-terrorism unit within the armed forces after attacks left at least 43 people dead and 73 wounded in a Christmas Day bombing of a church near Abuja.Also, there have been pockets of demonstrations by groups opposed to the fuel subsidy removal.Political tensions between the largely Islamic North and Christian South are a barrier to a ratings upgrade, S&P said.Meanwhile,the interbank lending rates eased last week to an average 14.33 per cent from 15.83 per cent the previous week, supported by greater liquidity owing to inflows of budgetary allocations for wages and government agency running costs, market sources said, on Friday.Dealers said that though the Central Bank of Nigeria (CBN) has increased the tempo of its open market operations in the week to mop up excess liquidity in the system, the market remained relatively liquid, helping keep rates low.'We expect the cost of borrowing to trend up next week if the central bank continues to aggressively mop up liquidity through (open market operations),' another trader said.
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