24 June 2014, Abuja – The naira, which rose to 180 against the dollar shortly after the inauguration of President Muhammadu Buhari about a month ago, has fallen to 222 at the parallel market due to a huge demand for dollars by importers and investors.
The dollar was sold for between 220 and 222 on the streets of Lagos, Abuja and Kano on Tuesday, while the pounds and euro were sold for 350 and 249, respectively.
Analysts and foreign exchange dealers said the future of the naira looked bleak, at least at the parallel market.
The Central Bank of Nigeria has been depleting the external reserves in a bid to defend the local currency.
At the interbank forex market, where the central bank intervenes regularly to defend the currency, the naira closed at 199 against the dollar on Tuesday, data from the FMDQ OTC website showed.
The external reserves fell to $29.03bn on June 22, from $29.8bn on May 18, data from the CBN website showed.
Prior to the latest development, the foreign reserves had been stable for several weeks.
Economic and financial analysts said the latest movements in the external reserves meant that the naira was beginning to come under some fresh pressure.
Concerned about the depletion of the reserves, the CBN met with bank officials on Friday to discuss how to mitigate the pressure on the external reserves.
The CBN has yet to make the outcome of the meeting official but sources said the central bank wanted the banks’ cooperation in order to reduce the pressure on the reserves.
The bank officials, it was learnt, told the CBN that it needed to relax its rules in the forex market and allow the naira to find its level.
The officials, however, promised to take the deliberations at the meeting to the CBN Governor, Mr. Godwin Emefiele.
It is unclear if the CBN will accede to the demand of the banks to relax the rules in the forex market, but the spokesperson for the central bank, Mr. Ibrahim Mu’azu, could not be reached immediately for comments. Calls made to his mobile telephone line were not answered.
Last November, the CBN devalued the naira after spending several billions of dollars to defend the local currency.
The Acting National President, Association of Bureau De Change Operators, Alhaji Aminu Gwadabe, told our correspondent on Tuesday that the naira’s outlook at the parallel market looked bleak, forecasting that the currency might fall to 230 against the dollar in the coming weeks if the central bank failed to deploy measures to curb the increasing dollar demand at the parallel market.
He said, “There is pressure on the naira again. Maturing import bills are making the demand for dollars to rise again. Most importers and investors are saying they could not access dollar at the official market.
“They are now turning to the parallel market, a situation that is now fuelling the demand for dollar and other foreign currencies at the parallel market.”
The Head, Research and Investment, Afrinvest West Africa Limited, a research and investment advisory firm, Mr. Ayodeji Ebo, said, “The CBN needs to do something urgently otherwise it (slide in the value of the naira) will continue.
“If the pressure continues, the CBN may devalue the naira. I think the CBN is also waiting to see the plan of the new government in order to align its monetary policies with it. Once the new government comes up with its plan, the CBN may devalue the naira. If that is done, foreign investors who have been waiting on the sidelines will come in.”