The Naira on Friday fell to an all-time low of N955 per dollar as demand for the greenback intensified at the parallel market, popularly called the black market.
The latest naira update shows that the local currency has lost 0.53 percent of its value in less than one day. On Thursday, the naira exchanged with the dollar at N945, which was stronger than the closing rate of N950/$1 and weaker than N940 traded on Wednesday at the black market.
At the Investors’ and Exporters’ (I&E) forex window, Nigeria’s official FX market, the naira fell by 2.88 per cent as the dollar was quoted at N780.00 on Thursday compared to N758.12 on Wednesday and weaker than N742.10/$1 quoted on Tuesday, data from the FMDQ indicated.
The daily foreign exchange turnover increased by 31.90 per cent to $69.74 million on Thursday from $52.87 million recorded on Wednesday.
“Individuals and importers are buying up dollars for business travel, school fees, medical and tourism”, a trader at Lagos International Airport said.
According to a report by Vetiva Research, the Nigerian Naira took a nose-dive following the monetary authority’s bold step to unify the foreign exchange rates.
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“Over the short term, the Nigerian authorities are working on a medium-term multilateral loan and the reintroduction of Bureau de Change operators in its FX framework. We believe these measures are inadequate without organic FX supply and sterilization,” analysts at Vetiva said in a new report.
“Going into the ember months, we retain our bearish outlook on the Naira till oil production recovers significantly. However, increased interventions (though unsustainable) could reduce the pace of depreciation at the parallel market,” the analysts said.
Vetiva predicted that Bureau de Change (BDC) operators could be brought into the official foreign exchange framework. According to the bank, BDCs were required to make a 2.5 per cent margin on the average rate sold at the foreign exchange market the previous day. This reintroduction also comes with a mandatory rendition of returns.
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“While acknowledging these measures, we believe the underlying low FX supply could elevate the FX gap. Thus, measures to boost crude supplies and organically grow the external reserve stock are required,” the analysts said.
The report noted that Nigeria’s reserves are fully sufficient to cover its current account, which is in a surplus position.
Consequently, the debt-reserve metric for Nigeria is deemed adequate. South Africa equally has enough reserves to cover its short-term external debt.
The current account balance measures the inflow and outflow of goods and services and investment incomes (primary and secondary), unrequited transfers and compensation of employees, usually in domestic currency. It is one of the two major accounts in the balance of payments account.
The current account balance mirrors a country’s performance in foreign trade in goods and services and could be in surplus or deficit.