This CHART OF THE DAY from Bloomberg shows that the rate at which the naira trades in the interbank market weakened to the widest gap on record against the official auction value this week, prompting the Central Bank of Nigeria to use dwindling reserves to maintain its target range for the currency.
Despite Godwin Emefiele’s claim that the naira is “rightly priced” and that investors need not panic, the naira is only likely to depreciate further as election rhetoric riles up. This makes devaluation almost inevitable as the CBN will have to deplete it’s reserves to defend an indefensible currency. It has already spent $1b in the last 5 days of auction defending the naira. Can it continue?