Nigeria’s naira weakens further on I&E fx window
The Nigeria naira currency on Monday weakened against the dollar on the Investors’ & Exporters (I&E) FX Window by 0.13 percent to N385.50 to the dollar on low dollar turnover and huge demand for hard currency.
However, the currency was firmed on the Central Bank of Nigeria (CBN’s) window to N379 to the dollar from N379.50 a dollar it closed on Friday and held steadied on the parallel market at N475 per dollar.
On Friday, the CBN adjusted its exchange rate to N379 to the dollar on its website weeks after it devalued the currency from N360 to the dollar on the official window.
The country’s currency has been on a free fall on the parallel market in the wake of the outbreak of coronavirus pandemic and the attendant disruption on the global supply chain, leading to a sharp drop in demand for crude oil.
Nigeria depends largely on revenue from crude oil exports for about 90 percent of its foreign exchange and with the drop in revenues from oil exports, the foreign exchange buffer has continued to decline.
Traders said turnover traded on the I&E forex window on Monday was $3.97 million, insignificant compared to the huge demand for hard currency from participants at the forex market.
Analysts already anticipating a higher inflation rate for July as a result of the exchange rate impact on fuel importations, foods and other items.
The CBN has devalued the currency twice this year by 18.99 percent as it moved toward eliminating multiple exchange rates in the country.
The government last week hike the pump price of the fuel, without given reason for the increase in price, but many operators said the increase may not be unconnected with the recovery in global oil prices and the effect of the devaluation of the naira on the cost of importation of the products.
The I&E window is the major platform where the bulk of domestic foreign exchange is traded daily as it gives the flexibility of allowing the market mechanism to determine the rate of exchange.
Both the International Monetary Fund (IMF) and the World Bank continue to pressure Nigeria to merge its multiple exchange rate windows to allow the forces of demand and supply to determine rates of exchange.