Naira Plunges into Deadly Spiral, Official Rate Hits N1520
Source: CBN

The Nigerian local currency, the naira, has crossed a new red line in its latest deadly spiral as the exchange rate hit N1520 in the official window on Thursday. The sustained negative exchange rate movement is reducing hope for recovery.

In the first half of the year, the naira lost 40% of its purchasing power in the official window, causing companies to scale back operation with wider broken balance sheets. Most of the analysts’ maintained similar view, saying the worsening exchange rates across market was propel by rising demand for US dollar and weak FX liquidity.

“Nature abhors vacuum”, LSintelligence Associates said in discussion with MarketForces Africa macroeconomic research team, saying it is either the system supplies FX, generates inflows on sustainable manner of kiss lower exchange rates goodbye.

Still, the Central Bank of Nigeria (CBN) maintains view that the local currency is grossly undervalue while forces of demand and supply appear to have pegged fx Rate much higher. Fitch Ratings projected that the naira will ended the year at N1450 per US dollar, while Goldman Sachs in its rush hour FX projection set N1,000 per greenback.

In its ‘April fool display of strength’, the naira had led global currency as the best performing. Exchange rates was near N1,000 per US dollar at both informal and official currency market. Since ‘April fool’ gain, the naira has continued to lose strength, few days after the apex bank denied that the authority used external reserves to defend the local currency.

According to data from the FMDQ, spot FX data suggest that the pressure on the naira has continued unabated. The naira closed at ₦1,520.24 per dollar, a 0.50% decline from the previous close.

Some analysts related the pressure on the naira to speculative activities and rising US demand.  In the parallel market, the naira depreciated by 0.99%, ending the day at an average of N1,529 per US dollar.

In the global commodity market, oil prices steadied on Thursday. Brent crude futures edged up 0.77% to $87.29 a barrel, and U.S. West Texas Intermediate (WTI) crude futures gained 0.64% to $83.73 per barrel. #Naira Plunges into Deadly Spiral, Official Rate Hits N1520

Brent Hits $87 as Hurricane Disrupts US Output