Nigeria’s naira depreciates to N477/$, down 3.47% month to date
By Oludare Mayowa
The Nigerian naira opened on Thursday at N477 to the dollar, weaker than N475 the local currency closed the previous day as demand pressure continued to mount on the available dollars in the market.
The local currency has lost 3.47 percent month-to-date on the parallel market as dollar shortage become acute in the country due to lack of capital flow from foreign investors and accretion into the country’s foreign exchange reserves as oil revenue dwidles.
The naira opened the month at N461 to the dollar and has since depreciated to N477 per dollar on the parallel market.
Analysts said the continue downward spiral of the naira is due to the inability of the Central Bank of Nigeria (CBN) to supply enough dollars to meet the growing demand in the market.
They said the huge baclkog of demand from manufacturers, traders and foreign investors seeking to repatriate capital is posing great challenges to the nation’s forex management.
Since September, the CBN has allotted over $1 billion to the bureau de change operators in a bid to inject more liquidity and ease demand pressures, but the volatility in the markets remained unabated.
A CEO of a drug company said the huge outstanding demand for dollar could not be met by the CBN due to insufficient dollar reserves and that the regulatory bank may be forced to devalue the local currency once again before the end do the year.
More demand for dollar continue to pile up as traders and businesses preparing for the coming Christmas season sale pile up pressure, while many who may want to go on holiday or pay school fees of their wards abroad also equally piling up demand at all the segments of the forex market.
Market observes said the speculations by market participants who expect the naira to depreciate even further continues to weigh on the parallel rate.
The near zero yields on fixed income has also forced many investors and highnetworth individuals to buy up dollar as store of value to hedge against depreciation of their assets.
At 14.23 percent inflation rate for the month of October, many investors in money market instruments are losing value and have either diverted their funds into the equity market or to the foreign exchange market to buy dollars.
Already, the spread between the official exchange rate and the parallel market has widen further by around 25.85 percent due to the rapid depreciation of the local currency at the parallel market.
The CBN continue to trade the local currency at N379 to the dollar on its window while the spread between the parallel market and the Investors’ and Exporters’ (I&E) forex window has widen to around 23.57 percent.
The local currency was quoted at N386 to the dollar on the I&E window on Wednesday.
Analysts said the the naira will continue to depreciate on all the segments of the market unless there is an improvement in the global prices of crude oil and offshore investors returns to the country.
The country’s foreign exchange reserves is current down to $35.53 billion by November 17, from $35.67 billion a month earlier.