Naira Hits 278 as Dollar Supply Worsens

The naira took further beating on Thursday at the parallel market, trading near its 2015 low of 280 against the United States dollar.

The dollar was sold for N278 at the parallel market on Thursday, as against 273 on Wednesday and 267.5 on Tuesday. The naira had on Monday closed at 265 against the dollar, compared to 263 on Sunday.

The Central Bank of Nigeria had on Wednesday sold about $15.5m to 1,650 Bureau De Change operators, but this was not enough to stem further slide of the nation’s currency at the unofficial market. The official rate ranges from 197 to 199.

The naira had on December 17, 2015 crashed to 280 against the greenback at the parallel market.

The Acting President, Association of Bureau De Change Operators, Alhaji Aminu Gwadabe, in a telephone interview with our correspondent, said he expected the weakness in the naira to continue.

“The naira has been battered seriously. We are talking about 278 now from 273 yesterday (Wednesday). Dollar demand is coming up and the supply is very limited.

“The CBN sold about $15.5m to 1,650 BDCs on Wednesday. Still there is a drastic short supply. Honestly, I am afraid because it is all about demand and supply and the way the thing is going, the demand is twice the supply in the market. To me, I don’t see the naira getting stronger soon.

The nation’s currency had closed at 262 against the greenback before the New Year holiday started last Wednesday. After the Christmas holiday, the local currency rose from 265 to 260.

Forex scarcity, which has caused significant decline in the nation’s external reserves, prompted the CBN to ration dollar supply to banks, importers, BDCs and the general public.

The nation’s external reserves declined by 15.79 per cent year-on-year to about $29.070bn on December 31, 2015, compared to $34.52bn a year ago, according to data from the CBN.

The nation’s foreign reserves fell by $112m to $28.960bn on January 5, latest data obtained from the Central Bank of Nigeria on Wednesday showed.

The CBN recently cut its weekly forex sale to the BDCs from $30,000 to $10,000 each.

Earlier, the central bank had refused to sell forex to over 1,600 BDCs over their failure to provide necessary documents for previous allocations.

At the official interbank market, the currency has been pegged since February and stood at 197 against the dollar on January 6. It traded at 199 to the dollar on the official interbank market on Thursday.

The BDCs account for less than five per cent of the total dollar trade in Nigeria, but provide an indication of where investors see liquidity and are willing to trade it.

Since June 2014, the CBN has limited the availability of hard currency to importers and placed restrictions on interbank dealing as it tried to mitigate an oil price crash that has gutted the government’s revenues.

Analysts predict that the naira will inevitably be revalued this year, causing further pain in a country that is heavily dependent on imports. The CBN has spent billions from the country’s already dwindling dollar reserves to shore up the currency.

“The issue is when, not whether they will [devalue]”, the Chief Macroeconomist at Ecobank Capital, Gaimin Nonyane, was quoted by Forbes as saying.