Market News

The naira extended its weakness on the official market yesterday as it closed at N1,459.73/$1 compared to N1,421.06 per dollar on the previous day, data from FMDQ shows.

The local currency was, however, flat to slightly lower against the dollar at N1,445/$1 on the parallel market yesterday compared to N1,450/$1 on Wednesday, currency traders said. After rebounding by over 40% in the span of six weeks to this year’s high of N1,090/$ at the parallel market on April 18, the naira has maintained a downward trend on the forex markets in the last fortnight, a development, analysts attributed to increased dollar demand amid low domestic greenback liquidity.

Analysts attribute the naira’s renewed weakness to intensified speculation, hoarding, as well as late disbursement of FX to Bureaux De Change (BDC) operators by the Central Bank of Nigeria (CBN). According to BDC operators, it usually takes three to four weeks after payment before the apex bank disburses dollars to them.

They said the situation has led to some BDCs withdrawing from the regulator’s dollar sales programme. In a recent report, Bloomberg said that supply of dollars is proving to be insufficient to support the CBN’s resolve to boost confidence in the naira. It quoted head of Africa strategy at Standard Chartered Bank, Samir Gadio, as having said that:

“The naira has been supported by onshore dollar selling as long positions were unwound, but the rally was probably overextended.” With Nigerians fretting about the naira’s renewed weakness, analysts at Financial Derivatives Company (FDC) recently called on the country’s fiscal authorities to urgently introduce measures that would complement policies which the Central Bank of Nigeria (CBN) adopted to bolster the local currency in March.

They specifically urged the fiscal authorities to take steps to boost exports as part of efforts to increase foreign exchange earnings which would enable the CBN to have adequate dollar buffers to defend the naira.