The naira slumped to a new all-time low
of 470 to the dollar on the parallel market on Wednesday, posting its
biggest daily decline since the Central Bank of Nigeria adopted a
flexible foreign exchange regime.
The local currency stood at 452 to the dollar at the close of trading on Tuesday, down from 445 against the greenback on Monday.
The naira closed flat at 312.99 against
the dollar at the interbank market on Wednesday, according to data from
FMDQ OTC Securities Exchange.
what the naira should be doing, adding,
“For me, it may not really reflect naira’s performance. But basically,
it is a demand and supply dynamics.”
According to him, the volatility in the
parallel market will continue as long as the 41 items excluded from the
official forex market remain banned.
“Around this time, a lot of people are
paying school fees abroad and we see a lot of demand for forex for other
sundry expenses or obligations. So, all of these will put pressure on
the naira at the parallel market,” he added.
Noting that the naira had been
relatively stable in the official market, Ezun said, “But the parallel
market will always respond to liquidity, which is not available. The
parallel market will help you to assess the level of liquidity in the
market.
“So, if liquidity is high, we will see
it in the parallel market. But as we speak today, there is no liquidity
in the market, and that is why we keep seeing that volatility in the
parallel market.”
The Ecobank analyst said the naira might hit 500 against the dollar in the coming days.
He explained, “The only way out is when
there is dollar inflow into the market, and this is one of the reasons
the CBN says it is not willing to cut the Monetary Policy Rate now. The
idea is that why you are still trying to woo foreign investors into your
fixed-income market, you should continue to be able to assure them of
returns on their investment.
“What the CBN can do is to use monetary policy to keep encouraging inflows into the market.”
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