The official exchange rate hit an all time low on Thursday after it traded for about N365.25 to the dollar in a single interbank market trade of $1 million, according to data from Reuters.
According to Reuters, the Interbank trading started two hours after the market opened and offered the naira sharply lower against the dollar. A total of $13 million had been traded at the time of Reuters reporting.
A look at the official closing rate displayed at the CBN’s website also showed that the exchange rate closed at a price of N325 the highest we have seen in the website of the CBN since the flexible exchange rate policy was introduced. Naira closed at about N321.5 on the website of the FMDQOTC and N347.25 according to Bloomberg’s data.
Also, the CBN website also confirms Nigeria’s foreign reserves dipped to as low as $25.78 billion, the lowest in over 10 years (July 2005 to be precise).
We reached out to analysts to understand what was going on. Early indications suggest that a surge in demand was one of the reasons for the sharp drop of the naira. Other’s opine that the CBN’s determination to stem the slide of the naira by selling more dollars is also having reverse effect as it is inadvertently creating demand from those who had previously stayed on the sidelines after months of frustration of not being able to buy forex.
Other reasons proposed suggests that with the government now spending part of its 2016 budgets, economic activities are gradually picking up in some sectors of the economy leading to a new surge in demand for dollars.
Earlier in the week, the CBN increased the limit banks can sell to BDC’s to $50,000 from $30,000 a week in the hope that it will improve liquidity in the retail end of the market.