Naira Depreciates to N996.75, Trailing Black Market Rate
Positive sentiment about the expected US dollar inflow announced by the Nigerian government has started to fizzle out.
This is coming at the same time when the market has started to discount the impact of the forex backlog the apex bank recently paid banks to offset various obligations.
The battle to save the local currency without FX market intervention has been weakened in a country that depends largely on imported goods and services to feed the citizens. Authority is struggling to control exchange rates by permutation and combinations that appear not to be working.
In what appears to be the worst unofficial devaluation ever, the Nigerian naira lost about 14% in a day of trading due to rising demand for foreign currency for closing various offshore transactions – by importers and manufacturers.
At the Nigerian Autonomous Foreign Exchange market, data from FMDQ indicated that the Naira further depreciated by 13.95% closing at N996.75 to the dollar.
This is a steep depreciation, analysts told MarketForces Africa, from N874.71 per dollar the previous day. Also, in the parallel market, the Naira traded weak on Thursday, closing at N1,140 against the US dollar.
It is becoming clearer that the official rate will shift near the parallel market FX spot price to achieve exchange rate convergence (if ever). What this means is that the naira would weaken further near the official rate.
“The Central Bank of Nigeria is not winning the fight to obtain a market clearing rate soon – the devaluation of the local currency in June has failed because it was rather influenced without proper review on existing macroeconomic conditions.
“The devaluation is not to help Nigerians survive, it is rather to hasty, unplanned and self-serving. Devaluation can have unintended consequences that are self-defeating. ’, experts told MarketForces Africa in a discussion.
External Reserves remained intact at $33.4 billion while the authority is awaiting $10 billion in inflows to fight the subtle currency war in the market.
The global oil market made a slight recovery following a significant decline in prices of oil grades in the week. Brent crude increased by 1.42% to $80.67 per barrel, while the West Texas Intermediate (WTI) crude oil also rose by 1.44% to $76.42 per barrel.
