Naira Plummets to a record N418 per Dollar as scarcity continues

August.31.2016

The naira plunged to ₦418 against $1 (USD) at the parallel market on Tuesday as scarcity of foreign exchange continued to weigh on the official interbank and black market.

The local currency, which closed at ₦414 against the US Dollar on Monday, traded at ₦415 in Lagos, ₦417 in Abuja and ₦418 in Kano, foreign exchange dealers said.

Foreign exchange analysts believe the lingering scarcity of forex has been exacerbated by the banning of eight commercial banks from the forex market by the Central Bank of Nigeria.

The CBN last week Tuesday banned 9 lenders from forex transactions for failing to remit $2.334bn from the Nigerian National Petroleum Corporation (NNPC)  into the Treasury Single Account

The Banks as at August 23rd were UBA - $530m; First Bank - $469m; Diamond - $287m; Sterling - $269m; Sky - $221m; Fidelity - $209m; Keystone - $139; FCMB - $125m; and Heritage Bank - $85m.

The United Bank for Africa Plc, was later re-admitted after it remitted its share of the funds to the TSA.

A day after the ban, the local currency depreciated to ₦402/dollar, down from the ₦397 it closed against US Dollar on Tuesday.

The local currency has continued to depreciate gradually. Forex dealers maintained that the demand pressure on the dollar, mounted by summer travellers and parents paying schools fees of their children studying overseas ahead of resumption in September, was exacerbated by the CBN ban.

The naira, which hit a fresh record low since the CBN floated the currency on the official interbank market in June, first touched ₦400/dollar at the black market this month.

Meanwhile, the CBN sold around $1.5m at the interbank forex market on Tuesday to support the local currency and ensure the closing rate stabilised, Reuters reported, quoting currency traders.

The naira closed at ₦305.50 to the dollar on the interbank market, same level it had traded since last week, having touched ₦325.50 a dollar intraday, but gained after the CBN’s intervention.

Traders said the naira had consistently closed around ₦305.5 to the dollar since August 22, an indication that the CBN was concerned about a particular price range for the local currency.

On Monday, the forex market registered $327m worth of trades, about six times more than its usual volume.

This included a single $270m transaction at ₦345 naira per dollar, by foreign investors buying local currency bonds.

Average trading is around $50m a day on normal days; it may reach $100m on days the CBN intervenes in the currency market.

According to traders, dollar shortage remains a major concern in the market even with the daily intervention by the central bank and a pocket of flows from offshore investors.

The naira traded at a fresh record low of ₦418 to the dollar on the black market, against ₦414 a dollar on Monday, traders said.

Updated 1 Year ago

 

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Tags:     Naira     Dollar     Exchange Rate