The Nigerian Naira plunged to a record low against the US dollar on Sunday at the parallel market.
The local currency was sold for 414 per dollar in Lagos and Abuja on Sunday.
Currency experts have said even though the CBN continued to intervene by selling dollars daily on the interbank market, its efforts were inadequate and considered weak.
“There is nothing in the policy environment that will arrest the decline unless the central bank has increased capacity to supply the market, which unfortunately it doesn’t have. So, we should expect the naira to remain under pressure in the coming week,” said Mr. Johnson Chukwu, the Chief Executive Officer, Cowry Asset Management Limited.
This is a liquidity issue, at this point, the Federal Government or CBN needs access to credit support either from a trading partner like China or the World Bank to stabilise the Naira.
“The decline of the naira against the dollar is beyond the recent suspension of some banks from the forex market. We have witnessed suspension of banks in the past, and it did not lead to any spike in exchange rate. The major challenge we have now is supply shortage. If that improves, naira will stabilise,” Chukwu added.
It should be recalled that some currency analysts interviewed by Bloomberg last week forecast 515 a dollar by the first half of 2017, and insisted the CBN needs to be more result oriented.
A currency analyst at Ecobank, Mr. Kunle Ezun, said “A lot of people in the official market will want to actually maximise the gains on their dollar holding by channelling it through the parallel market.”
“Sincerely, there is no major thing that one can expect in the parallel market. The only thing that could bring calm to the market is the supply of the US dollar. What we have in the market is basically demand and supply interplay,” Ezun added.