Naira Falls Across Fx Market As Reserve Declines To $27.8bn

BEVERLY HILLS, February 29, (THEWILL) – The naira depreciated in value against the dollar across foreign exchange (FX) markets due to shortage of the greenback.

Specifically, the naira lost N20 or 6.45 percent to close at N330/$, compared with N310/$ on Friday last week at the parallel market and lost N15 or 4.92 percent against the greenback at the autonomous market, closing at N320/$ as against N305/$ last Friday.

Data from FMDQ reveal that the naira depreciated slightly in value, at the interbank market, against the dollar by N0.03k or 0.02 percent, as it closed at N199.37/$ on Monday from N199.34 last week Friday but the CBN's clearing rate at the interbank market remained unchanged at N197/$.

In the same vein, Nigeria’s dollar reserves fell to $27.8 billion by February 25, a 1.6 percent decline from a month earlier, according to data from the central bank, on Monday, representing an 11.91 percent decline from the $31.57 billion recorded a year earlier.

According to analysts at Afrinvest Securities Limited, dynamics of the Nigerian FX was different last week, as the naira strengthened against the dollar at the parallel market to a high of N320/$ during the week.

This naira rally was however not unexpected given that the weakness in exchange rate in the previous week was driven majorly by speculations regarding inclusion of items such as international school fees and health care bills in the list of items banned for FX access at official and interbank markets.

In a bid to stem this speculative pressure, the CBN last weekend released a circular to douse these fears and affirmed the legality of FX demand for both services at the regulated markets.

While the unpredictability of BDC and parallel market rates continues, the CBN and interbank rates remain unchanged at N197/$ and N199.10/$, respectively.

“We expect pressure to continue to mount on parallel segment rate as a fundamental demand/supply mismatch for foreign currencies subsists, while liquidity remains weak in the interbank market,” the analysts said.

Story by David Oputah