Naira’s persistent slide in the parallel market is a pointer that the Central Bank of Nigeria (CBN) may further devalue the naira anytime soon as it did in March.
A dollar was sold for N460 at the parallel market on Tuesday, which is over 15% spread when compared to the interbank rate of N387 to a dollar on Monday.
Nairametrics had reported that the 12-month naira forwards was trading at N509 per dollar by 4.30pm on Monday, which means that the investors see the currency plunging to that level in a year.
Following the crash in oil prices, the CBN devalued the official rate from N307 to N360 to a dollar, and then the investors and exporters window from N366 to N380 to a dollar.
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According to Bloomberg, to see an improved convergence in the rates, the CBN would need to restart its intervention sales in the foreign exchange market.
The foreign exchange crisis is caused by low dollar inflow as a result of low prices of crude oil, which is the country’s main foreign exchange earner (about 90%), capital flight by foreign investors and very low foreign remittances as a result of global lockdowns due to the coronavirus pandemic.
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This is compounded by the suspension of sales of foreign exchange to Bureau de Change operators by the CBN.
The investor and exporters window is also badly affected by the liquidity crisis in the foreign exchange market, as the CBN suspended its periodic intervention since last month.
The demand for dollars by importers, foreign investors in the debt market who want to repatriate their funds, and even forex speculators will continue to put pressure on the naira and the country’s external reserve, as the declining export earnings are grossly inadequate.