The Naira depreciated across the official and parallel markets with many pundits yesterday projecting its further depreciation.
The Naira depreciated to as low as N545 per dollar at the weekend but there were projections of further depreciation to some N550 per dollar within the immediate period and as low as N600 per dollar in the medium to long-term.
Despite sustained growth in Nigeria’s foreign exchange (forex) reserves, the naira has been on the downswing. At the official Investors and Exporters (I & E) Window, the currency depreciated by 0.1 per cent to N412 per dollar. At the parallel market, the Naira dropped by 2.83 per cent to N545.00 per dollar while also depreciating by 2.48 per cent to N538.00 at the Bureau De Change segment.
The naira, however, closed flat at N380.69 per dollar at the Interbank Foreign Exchange market; supported by Central Bank of Nigeria’s (CBN)’s weekly injections of $210 million.
Market pundits attributed the depreciation to “sustained demand pressure” as huge unmet demand and wide gap between rates stoke speculative trades; exacerbating the tough exchange situation.
“In the new week, we expect I & E forex rate to further depreciate as unmet genuine demand flows to the parallel market” analysts at Cowry Assets stated.
On the outlook for naira, Chief Executive Officer, Financial Derivatives Company, Bismarck Rewane, was quoted by an online platform as saying that, while naira might trade within the range of N530 to N550 per dollar, in the meantime, it may rash to some N600 per dollar in the long-run as supply increases and the naira is allowed to adjust.
Nigeria’s forex reserves rose by $599 million to $34.78 billion at the last count on Thursday, sustaining a positive trend boosted by crude oil gains in recent period.
Analysts said they expected speculators to continue to take advantage of the wide gap between the official and unofficial windows. Analysts also expected to see increasing shift towards dollar-denominated investments as investors seek to lock into safe havens.
Pundits, meanwhile, expected improved liquidity in the official market as increased oil inflows from rise in crude oil prices and foreign currency borrowings of $6.18 billion and IMF’s facility of $3.4 billion boost the forex reserves.
Nigeria’s leading investment finance and economic research firms had warned that the naira faces the risk of precipitous fall and depreciation in the months ahead unless the CBN take urgent and coordinated measures to address pressure points and engender an enduring clarity in forex management.