The naira fell to a new low of 414 against the United States dollar
on Sunday amid the continued scarcity of foreign exchange in the
country, with economic experts predicting further pressure in the forex
market this week.
The development came five days after the Central Bank of Nigeria had
banned nine commercial banks from the forex market for failing to remit
the Nigerian National Petroleum Corporation’s $2.334bn into the Treasury
Single Account in line with President Muhammadu Buhari’s directive last
September.
The naira was sold for 414/dollar across some black market segments
in Lagos and Abuja on Sunday. It hit an all-time low of 412 against the
greenback at the parallel market on Friday, after closing at 409/dollar
on Thursday.
On Wednesday, a day after the CBN banned the nine banks from the
forex market, the local currency depreciated to 402/dollar, down from
the 397 it closed against the greenback on Tuesday.
Forex dealers said the demand pressure on the dollar, mounted by
summer travellers and parents paying schools fees of their children
studying overseas, was exacerbated by the CBN’s forex ban on the nine
lenders.
The currency dealers said the naira started falling after the CBN banned the lenders from forex transactions.
It first touched 400/dollar at the black market this month since the
CBN floated the currency on the official interbank market in June.
At the interbank market, the naira closed at 314.95 on Friday, with
traders saying interbank rates would ease this week when part of July’s
budget allocation must have entered the banking system.
But experts said the naira would plunge further against the US dollar
this week at the parallel market as forex supply remained a major
challenge.
Forex traders said even though the CBN had continued to sell dollars
daily on the interbank market, its efforts were considered weak and
inadequate, Reuters reported.
The Chief Executive Officer, Cowry Asset Management Limited, Mr.
Johnson Chukwu, said, “There is nothing in the policy environment that
will arrest the decline unless the central bank has increased capacity
to supply the market, which unfortunately it doesn’t have. So, we should
expect the naira to remain under pressure in the coming week.”
He said for the naira to stabilise, there must be a funding that the
Federal Government or the CBN could access, such as a credit support
from either the World Bank or a trading partner like China.
Chukwu said, “The decline of the naira against the dollar is beyond
the recent suspension of some banks from the forex market. We have
witnessed suspension of banks in the past, and it did not lead to any
spike in exchange rate. The major challenge we have now is supply
shortage. If that improves, naira will stabilise.”
He said the naira might hit a low of 420 to the dollar this week.
A currency analyst at Ecobank, Mr. Kunle Ezun, said the supply issue,
ban on 41 items from the official forex market and activities of
speculators would continue to push the value of the dollar up against
the naira.
He said, “Sincerely, there is no major thing that one can expect in
the parallel market. The only thing that could bring calm to the market
is the supply of the US dollar. What we have in the market is basically
demand and supply interplay.”
According to him, the volatility in the parallel market will continue
as the importers of the banned 41 items have resorted to the market.
“A lot of people in the official market will want to actually
maximise the gains on their dollar holding by channelling it through the
parallel market,” Ezun said.
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