Naira Tumbles by 40.78% as Nigeria Floats Rate
The naira depreciated significantly by 40.78% to N664.04 versus the United States (US) dollar at the Investors, and Exporters foreign exchange window as Nigeria seeks to converge rates.
The significant depreciation follows the decision to float rate, allowing banks to determine appropriate rates for conditions and processing foreign currency transactions.
On the other hand, the parallel market experienced an appreciation, with a rise of 0.85% to N758 (from N765, as market forces attempted to converge.
Consequently, spot rate has collapsed gaps between official and open market rates, while forward rates worsened, according to currency traders. Data from FMDQ Exchange showed that naira was traded at N471.67 at the Investors and Exporters (I&E) windows,
On the month, three-month, and one-year Dollar/Naira forward rates closed at N666.79, N700.33, and 757.32, respectively, indicating N102.03, N189.10, and N191.70 losses, Cowry Asset said in a note.
In a commentary note, Fitch views Nigeria’s extensive use of foreign exchange (FX) controls and import restrictions as a key credit weakness.
The rating agency said the policies deter foreign investment and cause foreign-currency shortages in the private sector. The president called for the Central Bank of Nigeria (CBN) to work toward a unified exchange rate in his inaugural speech.
Fitch anticipates a phased exchange-rate liberalization, moving the official rate closer to a market-clearing level. #Naira Tumbles by 40.78% as Nigeria Floats Rate Naira Steadies as Banks Issue Update on FX Purchase