- Naira Falls Against US Dollar to N366/$
Following the continuous fall in the price of crude oil below the Federal Government benchmark for the year, market speculators have started hoarding the US dollar as many projected that the Central Bank of Nigeria would devalue the local currency to protect the foreign reserves and sustain dollar liquidity in an import-dependent economy.
The uncertainty surrounding the local economy weighed on the Naira on Tuesday, the local currency declined by N6 to N366 per US dollar at the parallel market.
This was after Saudi Arabia led 14 members failed to secure Russia supports to cap oil production by another 1.5 million barrels per day on Friday. While Moscow had said the door was not closed to OPEC completely, Saudi Arabia did not see reason in further discussions without a predetermined framework for talks.
Experts had predicted that oil-dependent economies like Nigeria would struggle to fund 2020 budgets, saying Russia pulled out of further cuts for the same reason. Nigeria’s foreign reserves has been on the decline since peaking at $45 billion in June 2019 while capital flight has risen in Africa’s largest economy as investors complained of unclear economic path and counterproductive policies.
Market speculators have started disrupting the foreign exchange market by hoarding the US dollar amid growing speculation that the Central Bank of Nigeria would be forced to lower devalue the Naira to sustain its intervention program, prevent the foreign reserves and sustain dollar liquidity in the market.
According to one of the dealers, demand for the US dollar surged at the foreign exchange market on Tuesday due to devaluation fear. “People have been calling asking for dollars but we do not have enough so the rate had to go up,” the dealer who pleaded anonymity stated.
