Naira Gasps for Breath as US Dollar Demand Surges
Reflecting a need for stronger FX support, the naira continues to gasp for breath across foreign exchange markets due to massive demand for the US dollar seen in the currencies market lately.
The exchange rate is quoted at N1600 per US dollar in the parallel market this morning, according to channel check, losing N20 already on the day after closing at N1580 on Wednesday.
The naira has skidded to N1538 at the official window even with the Central Bank intervention, suggesting that demand pressure had built up sharply.
Reversing the previous trend, the local currency has apparently given up recent past gains attracted in its last rally in February, where the spot rate appreciated sharply by 2.5% with an exchange rate that tracked below N1500.
In their minds, some analysts are of the view that the local currency retreated as a result of foreign interest that upstreamed the US dollar abroad and the latest round of debt service payments by the Central Bank.
The CBN had also abstained from selling US dollars to banks, and low FX on the supply side reverberated through the parallel market. Bureau de Change are currently buying $25,000 from banks per week at the official rate, which has helped stabilise the exchange rate in the informal currency market.
Nevertheless, the extent of the naira’s recent falls means a “pause for breath” cannot be ruled out in the short term, analysts said in a chat with MarketForces Africa.
But a slew of analysts maintained a positive outlook for the local currency, citing the authority’s effort to stabilise exchange rates as positive. The latest round of decline is seen as a short-term development, though the naira pricing hasn’t settled.
Without the CBN selling US dollars to banks, the naira will not trade at the current rate—possibly rising above N1,600 which suggests the dust has not settled until the government overhauls the nation’s economic structure and earns more foreign currencies. $650m Notes: Moody’s Affirms Seplat’s Caa1 Corporate Family Rating
