Analysts are placing bullish and bearish bets on Naira (NGN) trend as the Central Bank of Nigeria (CBN), continues in its determination to maintain price stability and defend the local currency within its set price band in the medium term.

Naira optimists, say the CBN under governor Sanusi has enough ammunition and will power to keep the naira within the range of N155 plus or minus 3 percent versus the dollar, which is further supported by the tight monetary policy stance of the apex bank, as currency becomes the defacto monetary policy anchor.

Pessimists, however, say the naira may come under increasing pressure, following a handful of developments in the nation’s economy, particularly trends in the oil sector which have seen imports of refined crude oil pick up at a time when autonomous inflow of dollars from Foreign Portfolio Investments (FPIs) have slowed down.

This trend has seen the CBN increase its average supply of dollar to banks at its bi-weekly auction, from its usual range of $150 million – $ 180 million to  $200 million  to $300 million and  currently $585 million.

“I would think this is a situation of temporary volatility in the FX rate, which the CBN has calmed through its intervention,” Razia Khan, regional Head of Research, Africa at Standard Chartered Bank, said in a reply to questions.

“For as long as monetary policy is sufficiently tight, a stable NGN can be achieved and there is no need to entertain devaluation.”

The currency gained for a third day yesterday to N158.15 per dollar and headed for its strongest close since March 8, according to data compiled by Bloomberg, on speculation that Nigerian oil producers would sell dollars to meet month-end expenses.

Jimi Ogbobine, analyst at Consolidated Discount Limited, in a chat with  newsmen, said there were genuine worries on the Naira’s outlook, while the March 18th auction alone saw the CBN selling $300m.

The Naira has weakened 1.7 percent against the dollar, year to date, although it is still within the CBN band, while dollar reserves have increased 39 percent to $48.4 billion in the past year.

“Once again, we reiterate our call that there are chances that the CBN could seek to synchronise the midpoint of the official exchange rate to N160/dollar in line with Budget 2013 estimates which could technically imply devaluation albeit mild,” said Ogbobine.

“If the Naira continues to experience consistent pressure, the short term policy measures open to the CBN include a mild devaluation of the local currency,” he said.

Ogbobine added that a look at the fixed income market shows that yields across board (bonds and treasury bills) are now trading in positive real terms, up from the lows of December and January. However, yields still remain below 12 percent, partly due to the benign inflationary outlook.

The rebound in secondary market rates at the long end probably mirrors the less supportive risk momentum that may have pushed some offshore investors to lighten up duration and/or reallocate funds to the short end, Samir Gadio an emerging markets strategist at Standard Bank London said.

Nigeria’s year on year inflation rate rose to 9.5 percent in February, up from 9 percent a month earlier ,according to data from the National Bureau of Statistics (NBS).