- Naira Slides to N506 Against Dollar on Parallel Market
The Nigerian Naira slid to a new record low against the US dollar on the Parallel market on Friday.
The local currency plunged to N506 against the greenback, as traders reportedly try to tempt dollar holders to sell.
On the interbank market, lenders had traded only $1.30m at 315 per dollar by 11:30 GMT, traders said, as the Central Bank of Nigeria continued to ration dollar supplies.
The traders explained that the $660m sold by the CBN last week at auction was not enough to meet market demands.
“Despite rising FX reserves, it’s the amount of the FX that is supplied that matters. The parallel market, by its nature, is particularly sensitive to demand-supply imbalances and has a tendency to overshoot,” Reuters reported, quoting the Head of Africa Research at Standard Chartered Bank, Razia Khan.
“Supply of FX matters more than any other factor,” she added.
Economists and financial experts remain divided over the naira outlook in 2017 but few have said the local currency may depreciate further this year, while others like analysts at Investors King Ltd. have said the rising oil prices and external reserves will help contain further depreciation of the Naira value against the US dollar.
The external reserves rose to $28.6 billion on February 8, according to a CBN report. While Brent crude oil surged to $56 dollar a barrel, from about $40 recorded in October, before OPEC members reached consensus on production cut in November 2016.
The Naira remained at 305.25 a dollar on the Official trading window, where it has been since last August.