Naira continues to fall as forex demand picks up

The naira may likely resume its continued decline against the dollar in the coming days as post-holiday forex demand picks up again.

At the parallel market, the naira recovered from last week’s record low, trading at N740/$1 from N746/$1 as the new year transactions picked up.

Forex Trader, AZA Finance, Ikenga Kalu, said: “We expect the Naira to resume losses against the dollar in the coming days as post-holiday FX demand picks up again.”

The naira was yesterday exchanging at N434.78/$ at the Investors and Exporters Window (I&E) window, which is the official market, as exchange rate volatility continues at the parallel market.

Managing Director/CEO Financial Derivatives Company Limited, Bismarck Rewane, said exchange rate structure, restrictive policies, low sales and revenues, rationing of forex supply and capital flight are some of the key factors responsible for naira crash across various markets.

Analysts said the making of the Nigerian Autonomous Foreign Exchange Rate (NAFEX) also called the Investors’ and Exporters’ FX Window as the default official rate was a major step by the regulator to unify exchange rates.

CBN Governor, Godwin Emefiele said Nigeria, like other emerging market countries and countries reliant on oil exports, the decline in crude oil earnings as well as the retreat by foreign portfolio investors significantly affected the supply of foreign exchange into Nigeria.

“With the decline in our foreign exchange earnings and successive exchange rate adjustments, the CBN has continued to implement a demand management framework, which is designed to bolster the production of items that can be produced in Nigeria, and aid conservation of our external reserves,” he said at a bankers’ meeting in Lagos.

Emefiele explained that due to the unprecedented nature of the shock, the apex bank has continued to favour a gradual liberalisation of the foreign exchange market in order to smoothen exchange rate volatility and mitigate the impact which, rapid changes in the exchange rate could have on key macro-economic variables.

This, he said was in line with international best practices in countries where managed float arrangements are in operation.

“At the same time, measures are being taken by the authorities to improve our non-oil exports and other sources of foreign exchange. These measures have helped to prevent a significant decline in our reserves,” he said.