Nigerian naira depreciates further on parallel, I&E windows on demand surge
* Naira weakens to N485/$ on parallel market
* Down 5.20% month-on-month on parallel market
* Naira down 2.01% to N393.25 on I&E window
* Devaluation on the table despite CBN assurance
Nigerian naira currency slipped further on the parallel market two days after the Central Bank of Nigeria (CBN) gave an assurance that it will not allow the rate at the black market to determine the official exchange rate.
The naira depreciated to N485 to the dollar on the parallel market on Thursday compared with N482 the previous day and widening month-0n-month loss to 5.20 percent.
The local currency had opened the month at N461 to the dollar before it started depreciating rapidly on the back of demand surge as the CBN failed to supply enough dollar to meet genuine demand on the official market.
On the Investors and Exporters’ (I&E) forex window, the naira also depreciated significantly by 2.01 percent as the dollar was quoted at N393.25 against the last close of N385.50 previously.
There have been speculations that the CBN might devalue the local currency before the end of the year due to demand pressure and declining foreign exchange reserves.
However, at the end of the two-day meeting of the Monetary Policy Committee (MPC) on Tuesday, the CBN Governor Godwin Emefiele said the country’s official exchange rate would not be determined by what happens at the parallel market.
“We do not agree that the determining factor for our currency should be based on a market that is tainted, where people go to offer bribes,” Emefiele said.
“The black market is illegal where people do not provide documentation to support transactions. It is unfortunate and unfair for analysts to say Nigeria’s exchange rate is at 480 per dollar,” the Governor said.
However, analysts fear that with the rate the local currency is declining on the parallel market, the pressure might be mount on the regulatory bank to tinker with the value of the local currency at the official market.
The fact that the naira has equally been responding to the parallel market performance at the I&E forex window means the development could influence the response of the monetarists on the CBN to the fate of the naira.
Already, the country’s foreign exchange reserves have declined to $35.45 billion by November 24, compared with $35.66 billion a month earlier.
Analysts said in spite of the assurance of the CBN Governor, the naira may come under the hammer of the regulatory bank to help it conserve the forex buffer before the Christmas rush for the dollar.