Naira Falls to N793.70, Parallel Market Rate Worsens
Exchanged at N793.70 for a United States (US) dollar at the Investors and Exporters FX window, and N850 in the parallel market, analysts said the naira will continue to face market challenges until Nigeria begins to earn foreign currency at a level that matches demand.
The Nigerian naira continues to face market-related challenges as spot rates worsened across the market. Foreign exchange premium between the official and parallel market has widened further as rates diverge.
After the official devaluation carried out by the apex bank, exchange rates started moving closer to open market rate. However, forex analysts said weak foreign currency supply has been a major challenge.
Foreign inflows expectation has not been met, though, most analysts estimate show that the local currency is undervalued. On the other hand, some market critics are of the view that the lack of exportable locally produced goods is a major downside to a devaluation of the naira.
“Why should an import-dependent economy that produces near nothing for sales abroad devalue its local currency – import is FX rate inelastic for Nigerians. The Naira on Wednesday depreciated against the United States (US) dollar, exchanging at N793.70 at the Investors and Exporters window.
The latest rate quoted by FMDQ Exchange over the counter market translates to 6.83 per cent depreciation when compared with N742.93 for which it exchanged for the dollar on Tuesday.
The large daily depreciation of the Nigerian naira wiped off the previous day’s gain. Last week, the exchange rate crossed N803 per greenback due to the strain on the forex supply.
Currency traders said the open indicative rate closed at N778.07 to the US dollar on Wednesday. Meanwhile, a spot exchange rate of N853 to the dollar was the highest rate recorded within the day’s trading before it settled at N793.70.
Data from the organised forex market for importers, and exporters showed that the naira sold for as low as N699.50 to the US dollar within the day’s trading. A total of 87.19 million dollars was traded at the investors and exporters window on Wednesday.
In a chat, with MarketForces Africa, some analysts said the gap between official and parallel market rates has widened further. Today, the Naira fell by 2.41% to N850 from N830 in the open market.
“On FX: though I have an issue based on my pro-people mental position. There’s pressure on ground already. The Misery Index, I bet must be kissing 60% already. When a local currency is devalued, import becomes expensive. So, people will be forced to look inward to meet their needs.
“That principle has not been working when it is subjected to practice in Nigeria. Besides, Africa’s largest country by GDP isn’t producing anything that can compete in offshore markets. Naira devaluation would only make the poor go to their early graves because of hunger. It does nothing to 133 million technically poor people”, a Lagos-based Economist said in a chat.
Naira devaluation would only make the poor go to their early graves because of hunger. It does nothing to 133 million technically poor people. For the market, hot money will flow…but there’s a caveat. There’s already a shift in global economic conditions. More than ever, money has started smelling where to go to. Normally, money goes to where it is treated well.
“Devaluation isn’t for an import-dependent nation without exportable goods no matter how we think about it. For Nigeria which always breaches the law of gravity, the float will widen poverty level”, analysts said. #Naira Falls to N793.70, Parallel Market Rate Worsens
