Naira Falls Against Foreign Counterparts Across Key Forex Segments
Foreign exchange scarcity amid economic uncertainties continues to dictate the Nigerian Naira value against its global counterparts.
The local currency declined against the United States dollar on the parallel market, popularly called the black market, by N2 from N470 it traded last week to N472 on Monday.
Against the British Pound, the Naira remained unchanged at N575, its lowest in three years. The story wasn’t different with the Euro single currency as Naira succumbed to pressure and plunged by N5 from the N520 it exchanged on Friday to N525.
This decline did not stop on the black market as Investors and Exporters Foreign Exchange Window witness similar depreciation.
The Naira declined to N388.50 against the United States dollar on the I&E FX window, down from N388.40 it opened the day.
Also, activities on the window remained low as investors traded $38.72 million in turnover volume.
While the official rate stipulated by the Central Bank of Nigeria remained at N381 to a US dollar, persistent dollar scarcity continues to weigh on the Naira outlook.
Nigeria’s foreign reserves, used to back the Naira, has been on a downward trend since peaking at $45 billion in June 2019 and currently stood at $36 billion, according to the data from the central bank.
With crude oil trading at $42 per barrel and foreign capital inflow fading away due to global economic uncertainties, businesses and investors are worried the apex bank would soon lose its ability to intervene at the local forex market or support the Naira.
Also, the recent activity of the central bank at unifying the nation’s forex rate after years of saying no alluded to its fading prowess to defend the Naira.
Meanwhile, the central bank-led monetary policy committee on Monday maintained a 12.5 percent benchmark rate.
Mr. Godwin Emefiele, the Governor, CBN, said eight of the 10 members committee voted to maintain the current rates while the remaining two voted for further reduction in rates.
The governor said the members left the rate unchanged to assess the impacts of the recent 100-basis-points rate cut from 13.5 percent to 12.5 percent on the economy as a whole.
Forex Scarcity Weighs on Manufacturing Sector
Manufacturing Sector Suffers from Lack of Dollar Liquidity
The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, has said lack of dollar availability continues to weigh on the manufacturing sector in the first half of the year as the sector recorded its third consecutive month of contraction in the month of July.
According to Yusuf, several manufacturers had to source for forex on the black market, increasing scarcity on the already stressed section of the forex even more. This, other experts have blamed for the high Dollar-Naira exchange rate on the black market.
On Monday, the Naira was exchanged at N473 to a US dollar on the parallel market popularly known as the black market. The local currency gained N2 from the N475 it was exchanged before the Sallah holiday to N473 on Monday when the market opened.
“Across, practically, all sectors, we are experiencing cost escalation, loss of credit lines enjoyed from foreign creditors, forex remittance challenges and many more. We need an urgent response from the CBN to calm the situation and restore confidence in our foreign exchange management framework,” Yusuf stated.
The Lagos Chamber of Commerce and Industry said most of its 2,000 members have been hit by the dollar shortage and wide foreign exchange rate that is presently eroding their profits.
“If the situation persists, it will lead to lay-offs. If you are not producing, there will be a shortage of goods in the market, prices will go up,” he added
Naira Gains N2 Against US Dollar to N473 on Black Market
Naira Gains Against Dollar to N473 on Black Market
The Naira gained slightly on the parallel market, popularly known as the black market, on Monday to exchange at N473 per US dollar.
The local currency traded at N475 to a US dollar on Friday before gaining N2 to N473 on Monday.
This is coming on the back of dollar scarcity caused by falling foreign reserves and low oil prices.
Against the British Pound the local currency declined by N5 from N585 it traded on Friday to N590 on Monday.
This continues against the Euro single currency as the Naira depreciated by N2 to N542, down from N540 it traded on Friday.
On the Importers & Exporters Forex window, the Nigerian Naira exchanged at N389.25 against the United States dollar, slightly below the N388.33 it opened on Monday.
Investors traded $18.83 million during the trading hours of Monday on the I&E FX window.
The Central Bank of Nigeria’s exchange rate remains N381 to a United States dollar.
The apex bank had adjusted the local currency foreign exchange rate twice in the last few months to ease the pressure on the nation’s dwindling foreign reserves.
Still, the inability of the apex bank to improve the supply of the US dollar into the economy continues to weigh on the Naira value and general economic activities.
Naira Plunges to N475 Against US Dollar on Black Market
Naira Falls to N475 Against US Dollar on Black Market
The Nigerian Naira continues to fall against its global counterparts despite efforts to prop up the local currency value.
The local currency plunged by N3 from N472 it exchanged against the US dollar on Friday to N475 on Monday on the black market. Its lowest in over four years.
This continues against the British pound as the Naira lost N2 to N584, further down from N582 it was sold on Friday.
Against the Euro single currency, the Naira lost N5 from N530 it was traded on Friday to N535 on Monday.
On the Investors and Exporters Forex window, the Naira plunged from N381 per US dollar stipulated by the Central Bank of Nigeria to N389.25/$.
Investors traded $38.86 million on Monday, representing more than 100 percent increase from $12.61 million it traded on Friday.
Lack of dollar liquidity due to falling foreign reserves and low oil prices continues to dictate the Nigerian Naira value.
As stated on this platform, the central bank is gradually losing its power to defend the Naira at the current rate to the US dollar and other global currencies. This was why the currency was devalued twice in the last five months to better accommodate changes in macroeconomic data.
This we expect to continue, especially without COVID-19 cure and rising global uncertainty due to the US-China trade conflict.
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