It was another record low for the Naira today after it fell by 3.6% to N191 191.85 naira against the dollar as the market anticipates a decision to devalue further when the Monetary Policy Committee delivers it’s communique Tuesday. The naira however recovered as dollar sales by some oil companies helped reduce the bleeding to close at 187.10 naira to the dollar but still it’s worst ever at the interbank.
The last time the CBN devalued the Naira the dollar was still trading below $80 and has since dropped by over 40% since then suggesting the CBN has no option but to devalue. The CBN’s higher band of 168 plus 5 has also not being maintained as the naira has traded above 172 naira since it announced the last devaluation. The CBN has spent $2b defending the naira since it announced devaluation and has spent about $33b in 2014 defending the naira.
Whether the CBN has the courage to go through another round of devaluation will be a major concern considering the fast approaching February 14 Presidential election. If it goes on to devalue, it is likely that the opposition will pounce on this as another arsenal in their criticism of the handling of the economy by this government, giving further reasons for undecided voters to perhaps vote the opposition.
The Federal Government also reduced the pump price of Petroleum to N87, a move that was thought to be long overdue but see by many as an attempt to lure dissenting voters. The government is yet to explain how it will fund this latest round of subsidy payments considering the fiscal crisis it is facing.
MPC communique will be delivered by the CBN Governor Tuesday afternoon.
Update: The article was corrected to reflect the correct closing price of the dollar at the interbank to N187.10 and not N189.26