Despite the frequent foreign currency injections of the Central Bank of Nigeria (CBN) to help the naira, Nigeria’s currency closed at N363/$1 last week. The local currency relapsed marginally by 0.55 per cent at the parallel market week-on-week to close at N365 on Friday.
Financial analysts as-well-as currency retailers said the development came on the back of increased demand which was occasioned by activities heralding the Christmas and New Year celebrations.
The President, Association of Bureaux De Change (BDC) Operators of Nigeria, Mr. Aminu Gwadabe, said the development was part of foreign exchange market fluctuations.
He said, “The spikes maybe as a result of the renewed political spending that is going to be a threat to naira stability; secondly, the differential exchange rates at the various official window is also discouraging genuine competition among operators which the parallel market always survived on.”
The interbank window of the nation’s foreign exchange market had last Tuesday received a boost of $210m from the CBN.
The interventions were made at the wholesale, the Small and Medium-scale Enterprises, and invisibles segments of the market.
The Acting Director, Corporate Communications, CBN, Mr. Isaac Okorafor, had said the bank offered the sum of $100m to the wholesale segment, while the SMEs and invisibles segments received the sum of $55m each.
He reiterated that the releases were meant to boost liquidity, trade and ease of remittances for legitimate personal commitments.
According to a currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, the naira will likely depreciate further this week following the suspension of the Open Market Operations by the regulator.
He said, “Once you have interest rate at this low level, traders can avoid money to buy from the foreign exchange either for Christmas goods or to speculate. It has started from last week when naira closed against the Dollar at N365. For me, it might get to N370 if care is not taken.
“The stop in OMO sales by CBN might be revised soon and CBN might start issuing OMO to mop-up liquidity from the system.”
The naira also depreciated by 0.15 per cent to N360.96 at the Investors and Exporter Foreign Exchange window on Friday.
Total volume traded in the I&E FX window for the last week stood at $579.92m against $900.50m in prior week.
Inflows recorded during the week include Open Market Operation and Treasury Bills maturities valued at N70.83bn and N131.42bn, respectively, while outflows comprised foreign exchange and bond sales, valued at $210m and N77.59bn, respectively.
The overnight lending rate contracted weak-on-week by 192 basis points to 4.33 per cent, following improvement in system liquidity to N855.82bn, from N78.96bn in the previous week.