Untamed Demand for US Dollar Pins Naira at N837
A steep rise in foreign currency, especially the United States (US) dollar pinned the naira rate above N837 at the official window. Across foreign exchange markets, analysts have predicted a bleak outlook for the year after a failed devaluation that sought to unify exchange rates.
Given the recent development, the exchange rate would probably cross N900 or even worse due to an imbalance between demand and supply, analysts at LSintelligence Associates said in an email correspondence.
The solution to the worsening exchange rate has to be drastic, experts told MarketForces Africa, saying it is either the country ramp up export earnings or cut its citizens, and corporate imports appetite.
Already, the monetary authority has almost exhausted all possible means to keep the local currency stable but to no avail due to the skyrocketing demand for imported goods and services by individuals and corporations.
There is a decent change in the exchange rate would stabilise if and when the Central Bank of Nigeria (CBN) settled the forex backlog owed to foreign investors estimated between $6bn to $10bn, research analysts at LSintelligence Associates told MarketForces Africa.
In the exchange rate management system, we have surging demand which has persistently outpaced forex supply, thus keeping the naira on a tightrope, analysts added.
Demand and supply challenges continue to mount in the parallel market even after the apex bank backtracked from its restrictive forex sales to 43 items that started in 2015 under Godwin Emefiele, erstwhile CBN governor.
“There is a possibility there will be another tweak to the naira in the coming months. Apparently, the large devaluation in June has failed to achieve results. Instead, it has worsened Nigeria’s economic condition in totality and …without additional devaluation, the government has to either boost external reserves with foreign currency borrowings…
“…Or, there is a possibility that forex intermediation could be closed, reduced or redefined”, experts said at MarketForces Africa at analysts’ meeting. In the foreign exchange market, the Nigerian Naira experienced a negative performance against the US dollar. Specifically, the Naira depreciated by 4.54% to close at N837.49 to the dollar in the official market.
In the parallel market, the Naira’s performance remained relatively stable. The local currency steadied at N1,300 per greenback as the oil market continued to nosedive.
Data from the commodities market showed that the price of crude oil declined further with both major crude benchmarks trading below $90 per barrel. Thus, Brent crude traded at $88.65 per barrel and the West Texas Intermediate (WTI) crude oil was around $83.55 per barrel. #Untamed Demand for US Dollar Pins Naira at N837 IPPIS: FG to Delist Unverified Workers on Oct. 27
