The continuing pressure on the naira rose sharply on Wednesday with the local currency tumbling to a new low of 371 against the United States dollar at the parallel market. It had closed at 361 per dollar on Tuesday.
The delay by the Central Bank of Nigeria in explaining how the proposed flexible exchange policy will work has increased speculation on the currency.
Foreign exchange dealers and investors said the delay had caused uncertainty in the foreign exchange market and fuelled hoarding of hard currencies.
According to foreign exchange dealers at black markets in Lagos, Abuja and major airports across the country, the dollar was sold for between 367 and 373 on Wednesday.
Findings from various operators revealed that the local currency went for 371 against the greenback in most of the parallel market locations.
Abokifx.com, an online portal that monitors the movement of exchange rates at the parallel market, reported that the naira closed at 367 against the dollar.
However, the currency traded at 199.40 to the dollar on the official interbank market, within the CBN’s pegged rate band.
“Demand for the greenback has increased amidst growing scarcity as uncertainties created by the new policy have caused individuals to start to stock dollars,” the National President, Association of Bureau De Change Operators, Alhaji Aminu Gwadabe, told Reuters on Wednesday.
Economic analysts said heightened political risks, evolving economic crisis and the CBN’s delay in unveiling its blueprint on the proposed forex policy were responsible for the fast depreciating rate of the naira at the parallel market.
An economic analyst and Chief Executive Officer of Cowry Asset Management Limited, Mr. Johnson Chukwu, said, “Foreign investors are fast losing confidence in the economy, seeing that they cannot bank on what the central bank says. It is almost two weeks now since the announcement of a new policy and yet, the blueprint has not been unveiled.
“Secondly, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, just said that oil production had fallen significantly as a result of the disruption in the Niger Delta; this means a major drop in our forex earnings. So, this is an evolving economic crisis.”
Other analysts said the value of the local currency was dipping because customers were trying to hedge against a possible depreciation when the CBN clarifies its new forex policy.
The naira had closed at 357 against the greenback on Monday, before crashing to 361 on Tuesday.
The CBN had recently said it would abandon its naira peg to the dollar and introduce a flexible currency exchange regime.
It has not said how this will work, a situation that has unsettled investors who are worried about getting caught in the middle of a devaluation.
The CBN’s Monetary Policy Committee had two weeks ago announced the plan to adopt a flexible exchange rate. The Governor, CBN, Mr. Godwin Emefiele, said the blueprint for the proposed policy would be released soon.
The delay has, however, caused the stock market to record huge losses after recording landmark gains following the announcement of the plan to adopt the policy.
The central bank banned dollar sales to retail Bureaux De Change in January and reduced supply at its official interbank forex market in an effort to conserve reserves, now at their lowest level.