How naira sinks to N530 against US Dollar to a
fresh record low on Thursday amid the lingering scarcity of foreign
exchange in Nigeria.
The value of the naira fell against the US currency
on at both the parallel market and the Investors’ and Exporters’ foreign
exchange window.
The local currency, which stood at 526/$1 on
Tuesday, fell to 530/$1 at the parallel market on Thursday from 528/$1 on
Wednesday.
At the I&E window, the naira weakened further
to 411.67/$1 on Thursday from 411.50/$1 on Wednesday, according to FMDQ Group.
No less than 55 per cent to 60 per cent of Nigerian
forex transactions are traded at this window, which is used by the CBN and most
exporters and investors, according to Financial Derivatives Company Limited.
“It serves as not only a source of price discovery
but also a barometer for measuring potential and actual CBN intervention in the
market.
Some of the exchange rate determinants are balance
of payments, capital inflows and trade balance,” the FDC said.
On Tuesday the naira extended its decline on
Monday, sliding to an all-time low of 527 against the dollar at the parallel
market.
The naira had strengthened to 506/$1 on August 4
after plunging to 525/$1 at the parallel market on July 28, a day after the
Central Bank of Nigeria stopped foreign exchange sales to Bureaux de Change.
The CBN Governor, Mr Godwin Emefiele, had on July
27, at the end of the Monetary Policy Committee meeting, announced the stoppage
of forex sale to the BDCs, saying they had turned themselves into “agents that
facilitate graft and corrupt activities of people who seek illicit fund flow
and money laundering in Nigeria.”
In a related development, the country’s external
reserves have risen above $34bn for the first time in more than two and a half
months, according to the CBN.
The reserves, which had been wobbling in recent
weeks, jumped from $33.40bn at the end of July to $34.02bn on August 31, the
highest since June 9.
The CBN data showed that the reserves fell to a
record low of $33.09bn on July 12 from $34bn on June 10.
How Naira Sinks: Naira weaken in possible move to
unify exchange rates
Nigeria let the naira weaken to a record low
against the dollar on the official market on Friday, according to traders, who
said this could be a move by the central bank to unify multiple exchange rates.
It weakened further on the black market, traders
said.
“What the central bank is saying is that the (OTC)
spot rate will be the official rate because that’s where the largest volumes
trade,” one currency trader at a major Nigerian bank told Reuters.
Nigeria operates multiple currency regimes, which
frustrate businesses and have prompted calls from the World Bank for the rates
to be unified to attract investment.
Rising dollar demand has put pressure on the naira
as providers of foreign exchange, such as offshore investors, exited after the
COVID-19 pandemic triggered a fall in global oil prices.
Central Bank Governor Godwin Emefiele in February
said the currency was trading at 410 naira on the official market while the
government has been using that rate for its business as it tries to boost
earnings from crude sales, its main export.
The World Bank has linked approval of a $1.5
billion budget support loan to currency reforms.
The central bank had been trying to unify the rates
and boost the dollar supply through direct interventions.
It revised the futures rate on the naira upwards
last month to ease pressure on the currency after quoting the 150-day futures
contract at 435.81 naira, in its first dollar sales to foreign investors this
year.
The bank is due to hold its interest rate setting
meeting later this month with economic data on inflation and first quarter
growth figures expected from next week.
It has kept rates on hold to support the economy
hobbles by lower oil prices and impact of COVID-19 pandemic but dollar
shortages have been contributing to rising inflation, a key source of concern
for the central bank.
‘It is really bad’: Naira Sinks While Nigerians go
hungry as food inflation soars
‘I can’t simply afford to give my children what
they really need in terms of food,’ said Feyintola Bolaji, a mother of three in
her 50s based in Nigeria’s southwestern city of Ibadan.
Nigerian merchant Feyintola Bolaji, struggling with
stagnant earnings and dwindling sales, is now being squeezed by the ever
increasing prices demanded by her food suppliers, leading her to cut down on
the amount she can put on her own family’s table.
Bolaji’s belt tightening is being shared by
millions across Africa’s most populous nation. Not long after Nigeria’s
statistics agency revealed that one in three people in the continent’s largest
economy were unemployed, on Thursday it announced that food inflation has
accelerated at the highest pace in 15 years, compounding the misery of many
households.
“It is really bad, I can’t simply afford to give my
children what they really need in terms of food,” said Bolaji, a mother of
three in her 50s based in the southwestern city of Ibadan. “I try to make them
get the nutrients they need as growing children, but it is not enough,” she
said, adding “I have had to cut down on meat and fish.”
Insurgency, unrest, and the stand of President
Muhammadu Buhari’s government on food imports in a nation where more than half
the population lives on less than $2 a day are worsening food insecurity in the
African country.
Meanwhile, the coronavirus pandemic has robbed 70%
of Nigerians of some form of income, according to a Covid-19 impact survey
published by the statistics agency last month.
Food inflation rose to 22.95% in March, caused by
wide-ranging price increases across items such as cereals, yam, meat, fish and
fruits.
Those soaring costs have been in part blamed on a
worsening conflict between farmers and herders in Nigeria’s agriculture belt
that Buhari has struggled to quash.
The unrest, combined with the more than decade-long
Boko Haram insurgency in the north, a weakening currency and higher fuel prices
have also contributed to rising food prices, according to SBM Intelligence, a
Nigerian research firm.
What is your opinion on the recent falling of
Naira?
