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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