24 January 2015, Abuja – The naira on Friday crashed against the United States dollar from 191 to 208 at the parallel market, otherwise known as the black market.
The dollar sold for between N205 and N208 on the streets of Lagos, Abuja and other major cities in the country.
The latest fall in the naira’s value came less than two months after the Central Bank of Nigeria was forced to devalue the local currency by eight per cent from 155 to 168 against the dollar following the continued decline in the prices of crude oil in the international market.
The fall in oil revenue, from which the nation derives 95 per cent of its foreign exchange, has led to a drastic reduction in the external reserves from which the CBN supports the naira.
The reserves had fallen by over 20 per cent from $43bn a year ago to $34.4bn as of January 22, 2015.
Although the CBN still sells the dollar to approved buyers for N168 at its twice-weekly regulated auctions called the Retail Dutch Auction System, the naira closed against the United States currency at 190.08 at the interbank segment of the foreign exchange market on Friday.
Analysts said the latest fall in the value of the naira at the parallel market was due to recent policy measures by the CBN, which were aimed at stopping speculations on the currency.
The CBN had on Wednesday stopped banks and other dealers from selling dollars to Bureaux de Change operators. It also said dollars bought at the RDAS and interbank segment of the foreign exchange market should be used strictly for the funding of letters of credit, bills for collections and invisible transactions.
However, the central bank on Friday evening increased its weekly dollar sale to the BDCs from $15,000 to $30,000 and said the move was meant to reposition the forex market.
Some analysts said the CBN’s action might calm the market and make the naira to appreciate. Others, however, said the naira might depreciate further next week.
The News Agency of Nigeria reported on Friday that the naira depreciated against the dollar as it traded at N208 from the N191.50 it sold for on Monday, January 19, thus losing N16.50 within five days.
The CBN’s website, however, put the naira against the dollar at N167.50, while the pound sold for N253.20 and the euro stood at N193.89.
NAN quoted that some Bureau de Change and black market operators in Lagos as saying that they could not give rates to the pound sterling and the euro.
The dealers also said that there was a scarcity of dollars in circulation, because the CBN reduced the sale of dollars to the BDCs since last year.
The dealers added that the recent review of the forex trading positions of banks to 72 hours was also contributing to speculations in the system.
The effect, they added, was that the naira could depreciate further by next week.
Industry analysts recently predicted that the naira would likely exchange against the dollar for over 220 soon.
According to experts, the naira has remained under continued pressure owing to the continued fall in the prices of crude oil in the international market and increased demand for the dollar locally.
The development, they said, would lead to a number of economic challenges this year.
“After the elections, the naira will sell above 220 against the dollar at the parallel market. And it is also noteworthy to say that the CBN will devalue the naira again after the February elections. The reason is due to the falling oil prices and the current demand pressure we are witnessing on the dollar,” the Acting President, Association of Bureau de Change Operators, Mr. Aminu Gwadabe, told our correspondent in an interview on Monday.
Some Nigerian and foreign analysts have also predicted that the naira will sell for between 195 and 205 at the official market this year.
They equally believe that the CBN will devalue the naira again after the elections.
BGL Plc, a Nigeria-based research and investment advisory firm, quoted analysts in its recent 2015 outlook report as saying that the naira would sell around 205 to the dollar at the official market.
Goldman Sachs had on July 18, 2014 forecast that the naira would trade at 195 to the dollar in 12 months.
The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said the parallel market rate was expected to cross N200 as the dollar demand pressure persists.