The Naira depreciated at the official and parallel markets amid growing concerns that oil revenue fluctuation and global monetary tightening would lead to further devaluation of the currency.
Official data and trading reports showed that the Naira depreciated by 0.12 per cent at the official Investors and Exporters (I & E) Window to close at N416.50 per dollar.
It also depreciated by 0.65 percent to close at N575.90 per dollar at the parallel market. The Naira, however, closed flat at N430 per dollar at the Interbank Foreign Exchange market (IFEM).
- Naira drops to N570 per $1 at parallel market
- World Bank forecasts Nigeria’s economy to grow by 2.5% in 2022
The Central Bank of Nigeria (CBN) continued its weekly injection of$210 million; distributing $100 million to the Wholesale Secondary Market Intervention Sales (SMIS), $55 million to Small and Medium Scale Enterprises (SMEs) and $55 million to invisibles, Punch Newspaper reports.
Analysts at Cowry Asset Management, which actively trades in financial instruments, said they expected the Naira to depreciate further in the new week as investors react to changing global dynamics.
Analysts at Cordros capital noted that although the CBN might have enough supply to support the foreign exchange market over the short term, global and domestic challenges may force the apex bank to adjust the Naira exchange rate further.
“Hence, we think further adjustments in the Naira/Dollar peg closer to its fair value and flexibility in the exchange rate would be significant in attracting foreign inflows back to the market,” Cordros capital stated in a weekend note.
The Naira depreciation across the markets came on the heels of all by the International Monetary Fund (IMF) that Nigeria and other emerging economies should allow their currencies to depreciate to avoid a disorderly condition that may arise in their forex markets as a result of an imminent policy tightening by the Federal Reserve Bank of United States.
Economies, especially Nigeria as it navigates through pre-election year, the above action plans as proposed by IMF posed a difficult choice for the oil-rich African country as it trades off supporting a relatively weak domestic economy with safeguarding price and foreign exchange stability,” Cowry Asset stated.
Analysts said insecurity, high costs of doing business and multiple foreign exchange windows have done disservice to foreign investment into the country, thus its relatively low capital inflow from foreign investors.
Analysts, however, called on the government to also take responsibility to restore investors’ confidence given the nature of the challenges facing the country which may be aggravated by any rate hike by the apex bank.
