Naira Depreciates to N321.50/$1 on Interbank FX Market

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The naira fell to N321.50 to the dollar on the interbank foreign exchange (FX) market yesterday, weaker than the N314.14 to the dollar it closed the previous day.

But on the parallel market the naira stood at N395 to the dollar.
Nigeria’s currency has slumped 38 percent since the central bank ended a 16-month peg of N197- 199 per dollar on June 20.
“There’s still a lot of demand for dollars,” Switzerland-based brokerage Continental Capital Partners SA, Craig Thompson, told Bloomberg yesterday

“The central bank has been supplying them. They sold some at N309 yesterday to keep the rate down. They’ve been selling dollars most days to keep it going above N320 and have done their best to try and keep it closing around N310. Managing the exchange rate is difficult because there’s pent-up demand.”

Foreign-exchange flows have been slow to trickle in to the country since the devaluation. The dollar shortage has been exacerbated by militant attacks on oil facilities in the south of the country, which have sent crude production tumbling to an almost three-decade low. Nigeria relies on oil for 90 percent of export earnings.

The benchmark equity index fell 0.1 percent, its first drop in four days, to 27,402.99. It’s down 8.9 percent in the past year. Yields on Nigeria’s $500 million Eurobond due in July 2023 were little changed at 6.38 percent.

Local banks are unable to meet much of the demand for dollars, forcing their customers on to the black market. There, the naira trades at 394 per dollar, around 11 percent weaker than the official rate.

“There is no liquidity” in the interbank foreign-exchange market, Kunle Ezun, an analyst at Ecobank Transnational Lagos, said by phone. The central bank sold dollars on Aug. 15 and 16 and will continue intervening, he said.
“They won’t want to see this jump,” Ezun said. “They will come in, maybe tomorrow, to bring it down to N320 or N330.”