Naira fall against Dollar

The naira on Friday crashed against the United
States dollar from 191 to 208 at the parallel
market, otherwise known as the black market.
The dollar sold for between N205 and N208 on
the streets of Lagos, Abuja and other major
cities in the country.
The currency had exchange for between N188
and N191 on the streets of Lagos and other key
cities on Wednesday and Thursday morning,
dealers said.
The latest fall in the naira’s value came less
than two months after the Central Bank of
Nigeria was forced to devalue the local currency
by eight per cent from 155 to 168 against the
dollar following the continued decline in the
prices of crude oil in the international market.
The fall in oil revenue, from which the nation
derives 95 per cent of its foreign exchange, has
led to a drastic reduction in the external reserves
from which the CBN supports the naira.
The reserves had fallen by over 20 per cent from
$43bn a year ago to $34.4bn as of January 22,
2015.
Although the CBN still sells the dollar to
approved buyers for N168 at its twice-weekly
regulated auctions called the Retail Dutch
Auction System, the naira closed against the
United States currency at 190.08 at the
interbank segment of the foreign exchange
market on Friday.
Analysts said the latest fall in the value of the
naira at the parallel market was due to recent
policy measures by the CBN, which were aimed
at stopping speculations on the currency.
The CBN had on Wednesday stopped banks and
other dealers from selling dollars to Bureaux de
Change operators. It also said dollars bought at
the RDAS and interbank segment of the foreign
exchange market should be used strictly for the
funding of letters of credit, bills for collections
and invisible transactions.
However, the central bank on Friday evening
increased its weekly dollar sale to the BDCs from
$15,000 to $30,000 and said the move was
meant to reposition the forex market.
Some analysts said the CBN’s action might calm
the market and make the naira to appreciate.
Others, however, said the naira might depreciate
further next week.
The News Agency of Nigeria reported on Friday
that the naira depreciated against the dollar as
it traded at N208 from the N191.50 it sold for on
Monday, January 19, thus losing N16.50 within
five days.
The CBN’s website, however, put the naira
against the dollar at N167.50, while the pound
sold for N253.20 and the euro stood at N193.89.
NAN quoted that some Bureau de Change and
black market operators in Lagos as saying that
they could not give rates to the pound sterling
and the euro.
The dealers also said that there was a scarcity
of dollars in circulation, because the CBN
reduced the sale of dollars to the BDCs since last
year.
The dealers added that the recent review of the
forex trading positions of banks to 72 hours was
also contributing to speculations in the system.
The effect, they added, was that the naira could
depreciate further by next week.
Industry analysts recently predicted that the
naira would likely exchange against the dollar for
over 220 soon.
According to experts, the naira has remained
under continued pressure owing to the continued
fall in the prices of crude oil in the international
market and increased demand for the dollar
locally.
The development, they said, would lead to a
number of economic challenges this year.
“After the elections, the naira will sell above 220
against the dollar at the parallel market. And it
is also noteworthy to say that the CBN will
devalue the naira again after the February
elections. The reason is due to the falling oil
prices and the current demand pressure we are
witnessing on the dollar,” the Acting President,
Association of Bureau de Change Operators, Mr.
Aminu Gwadabe, told our correspondent in an
interview on Monday.
Some Nigerian and foreign analysts have also
predicted that the naira will sell for between 195
and 205 at the official market this year.
They equally believe that the CBN will devalue
the naira again after the elections.
BGL Plc, a Nigeria-based research and
investment advisory firm, quoted analysts in its
recent 2015 outlook report as saying that the
naira would sell around 205 to the dollar at the
official market.
Goldman Sachs had on July 18, 2014 forecast
that the naira would trade at 195 to the dollar in
12 months.
The Managing Director, Financial Derivatives
Company Limited, Mr. Bismarck Rewane, said
the parallel market rate was expected to cross
N200 as the dollar demand pressure persists.