Seems its a continuous downward slope for our national currency, as yesterday, the Naira suffered its biggest daily depreciation against the dollar as it exchanged for N345 to a dollar in the parallel market.
This represents N20 depreciation when compared with the closing exchange rate of N325 per dollar in the market on Friday. The naira eased 1.47 percent from Friday’s close of 340 to the dollar, while the official rate remained at 197.50 to the dollar at the close of trading yesterday.
The naira also depreciated by N45 against the British pound as the parallel market exchange rate rose to N485 per pound, yesterday, from N340 on Friday.
The exchange rate volatility worsened thereby forcing the Central Bank of Nigeria (CBN) to devalue the official exchange rate to narrow the gap between it and the parallel market.
This development widened the gap between the interbank rate and the parallel market rate to N147.53 per dollar from N127.53 per dollar last week.
Bureau de Change sources attributed the sharp depreciation to persistent scarcity of the dollar and pound sterling in the market.
Black market traders say the rate had slipped as Nigerians with school and medical bills to pay abroad anticipated the CBN would stop allocating currency for such payments. The bank has not denied or confirmed any such plans.
Tumbling global oil prices have battered Nigeria’s crude exporter, with foreign exchange reserves down to an 11-year low at $27.85 billion by February 11 and international price of crude oil has remained below $30 a barrel.
The devaluation campaign against the naira, given the low foreign exchange receipt of the Federal Government from crude oil, has been resisted by the monetary and fiscal authorities on the argument that previous devaluations under the same economic conditions did not result in anything better.
Nigeria’s government is concerned that further depreciation will hurt poor Nigerians, but the bank’s refusal to revise the pegged exchange rate has widened a chasm between official rates and the parallel market.
The naira has been on steady decline since January 12, 2016, when the Central Bank of Nigeria, CBN, stopped weekly dollar sale to BDCs. Prior to this action, the naira traded at N265 per dollar in the parallel market.
Consequently, the naira has depreciated by N80 in the parallel market since the CBN took the action. The steady depreciation was also aggravated by inability of the CBN to meet foreign exchange demand.