Nigeria’s naira falls 1.29% against dollar on parallel market As fx reserves down
By Oludare Mayowa
The Nigerian currency has continued to lose value against the dollar on the parallel market in spite of efforts by the Central Bank of Nigeria (CBN) to prop up the local currency through intervention in the official and bureau de change markets.
The naira close at N468 to the dollar on the parallel market on Friday, down 1.29 percent from the N462 the local currency opened the week.
At the Investors and Exporters (I&E) Forex market, the naira weakened by 0.09 percent as the dollar was quoted at N386.00 compared with N385.67 it closed previously. Most participants maintained bids between N383.00 and N393.57 per dollar.
The CBN has sustained its intervention in the parallel market and official window since September in a bid to douse pressure on the local currency.
Sources said the regulatory bank has since Last month consistently sold around $125 to $150 million on a weekly basis to offset the backlog of demand from offshore investors wanting to exit the country and a weekly sales of $10,000 per bureau de change operators.
The dollar sales by the CBN was meant to reduce pressure on the local currency and build investors’ confidence in the ability of the regulatory bank to meet the demand for the dollar.
However, in spite of the CBN move and the rally in the oil market, many investors continue to speculate on the local currency with the intention to hedge against a possible further devaluation of the currency by the regulatory bank.
The CBN had twice this year devalued the local currency in an attempt to abolish the disparity between the official and parallel market rates and ensure the unification of the exchange rates in the country.
But lack of accretion to the foreign exchange reserves due to low oil prices and increase demand for dollar on the domestic market continue to undermine confidence in the market.
Analysts are anticipating another round of devaluation of the local currency before the end of 2020, and this has continued to push up demand for the dollar on the domestic market.
The nation’s foreign exchange reserves were down to $35.62 billion by November 11, this was against $35.69 billion they were a month earlier and the CBN is under pressure to conserve more dollar for essential need in the event of a second wave of Coronavirus pandemic lockdown.
“I believe the CBN has done all it could to manage the forex resources but there is nothing the bank can do in the face of lack of accretion to the reserves.
“Currently, the CBN is not meeting up to 25 percent of demand in the market and this is even creating some discontent among manufacturing firms and other importers as they fear that there would be a scarcity of goods in the next few months due to shortage of dollar to imports needed raw material,” a Chief executive of a local unit of a multinational firm told one of our correspondents.
The CEO said he could not patronise the parallel market or the bureau de change for his dollar need because of governance issues and he is running out of stocks of raw materials for essential goods.
In fact, sources said most of the intervention funds created by the CBN are being diverted into other use because most beneficiaries could not access dollars to purchase essential machinery and raw material needed o produce.
Analysts said the CBN is left with fewer options to manage the country’s forex resources and may have to be hoping that oil prices will continue to rally and that the country revenue from foreign exchange will increase in the coming months.