Market News

Nigeria's naira drops to record closing low on spot market - REUTERS

MARCH 04, 2021

By Chijioke Ohuocha

ABUJA, March 3 (Reuters) - The Nigerian naira dropped to a record closing low of 411 per dollar on the spot market on Wednesday, exchange data showed after the central bank last week acknowledged that the currency was trading weaker.

The central bank had said on Friday that the naira was hovering around 410 per dollar at the official window compared to 360 naira last March, as the currency adjusts to dollar shortages following a fall in foreign investment and oil prices.

The comments have rattled investors wondering whether the central bank has devalued its official naira rate. On Wednesday the naira was quoted at 381 naira on the official market, a level where it has been stuck since last July.

"A lack of official confirmation of the devaluation hardly inspires confidence," Virag Forizs, emerging markets economist at Capital Economics, wrote in a note, revising a year-end forecast to 425/$ from 400/$.

Forizs doubted the lastest devaluation will mark a meaningful shift in Nigeria's exchange rate policy since dollar restrictions aimed at defending the naira were still in place.

"We remain comfortable with our view that policymakers will continue with their piecemeal approach to the currency, only letting the naira weaken when pressure mounts."

Nigeria operates a multiple exchange rate regime which it has used to manage pressure on the currency after an oil price crash created dollar shortages. The IMF and the World Bank have asked the central bank to unify exchange rates.

Telecoms giant MTN Nigeria said on Wednesday it was looking to repatriate between $250 million and $300 million in backlog dividends and had so far gotten some $20 million.

The naira has been trading at around 410 naira since February on the over-the-counter spot market. It dropped to a record low of 410.50 three weeks ago.

It was quoted at 480 per dollar on the black market, a premium of 20.6% to the official rate.

(Reporting by Chijioke Ohuocha; Editing by Toby Chopra and Jonathan Oatis)


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