08 January 2015, Lagos – Analysts at Financial Derivative Company Limited have predicted that the naira will further depreciate to N200 per dollar at the parallel market.Meanwhile the naira recorded mix performance in the foreign exchange market yesterday. At the interbank segment, the naira appreciated by 58 kobo as the interbank rate fell to N183 per dollar from N183.58 on Tuesday.
The appreciation was occasioned by the huge dollar sales by the Central Bank of Nigeria, CBN, at the bi-weekly RDAS sessions held on Monday and yesterday where it sold $629.39 million. But at the parallel market, the naira however depreciated by N1 against the dollar, as the paralel market rate rose to N191 per dollar from N190.
“The parallel market rate is expected to cross N200 per dollar as dollar demand pressure persists”, they said in the December edition of the Company’s monthly economic bulletin.
They however noted that “A N200 per dollar rate is only a 15 percent adjustment as against 45 percent devaluation in 2009. Although, projecting the value of naira is currently clouded by several domestic and exogenous factors, the fair value of the currency is expected to be between N180 per dollar and N195 per dollar at the interbank market.
“The naira adjustment by the CBN is timely and the depreciation of the naira has reduced over time because the official rate is closer to equilibrium. A further depreciation of 3-5 percent is also expected at the official market. This is due to anticipated impact of the global oil market spiral on external and fiscal buffers which limits the central bank’s ability to support naira. In addition, if the US changes its monetary policy stance, there might be a reversal of capital flows and an erosion of some of the external reserves. It should be noted that on July 18, 2014, Goldman Sachs forecast that the naira will trade at N165/$ in 3 months, N175/$ in 6 months and N195/$ in 12 months.”
In a review of the foreign exchange market, they noted that the Naira depreciated across all segments of the forex markets In November. The naira depreciated by 5.93 percent to close at N165 per dollar at the official market, compared to October’s closing rate of N155.76 per dollar. At the interbank market, the naira depreciated by 7.88 per dollor to close at N178.7 per dollar from N165.65 per dollar in October.
While the parallel market rate lost 7.02 percent to close at N183 per dollar from N171 per dollar. So far in December, the naira has lost 1.82 percent, 2.74 percent and 2.73 percent to trade at N168 per dollar, N188 per dollar and N183.6 per dollar at the official, interbank and parallel markets respectively. The volatility in the forex market is expected to persist as oil prices continue to decline. The CBN will continue to defend the naira within the range of N180 per dollar and 185 per dollar at the interbank market.
“Nigeria’s external reserves declined by 5.06 percent ($1.96 million) month on month and closed at $36.8 billion in November from $38.76 billion in October.
*Babajide Komolafe – Vanguard