The naira is expected to depreciate
further this week as rising dollar demand continues to put the local
currency under pressure at the Central Bank of Nigeria’s interbank forex
window and parallel market.
The local currency eased by four per
cent against the dollar on Friday to hit a record low after the CBN sold
the greenback at a weaker rate to boost interbank market liquidity,
forex traders said.
The naira hit a record low of 295.25 on
thin trade at the interbank market, a month after the CBN lifted its
currency peg, Reuters reported.
A total volume of $12m traded on the
interbank on Friday at an average rate of N290, with traders attributing
the sale to a CBN intervention.
The interbank market had remained broadly stable at 282/283.
At the parallel market, the naira closed
at 365 against the dollar on Friday. The local currency had closed at
352 per dollar the previous Friday.
The naira experienced volatility last week, as supply gap at the interbank forex market weighed on the parallel market.
Forex dealers said inadequate liquidity in the interbank market was making the naira to depreciate very fast.
According to them, the naira will
continue to depreciate at the parallel market as holidaymakers seek
dollars to finance their summer vacations abroad.
Currency analysts and experts said there
was a need for the Central Bank of Nigeria to address liquidity problem
at the interbank market to stabilise the local currency.
“It all comes back to liquidity; that is
what drives the market, the Chief Executive Officer, Nigeria,
Renaissance Capital, a United Kingdom-based investment bank, Mr. Temi
Popoola, had said.
The CBN had a few weeks ago removed its
16-month naira peg and adopted flexible exchange rate policy, after
forex restrictions led to factory closures and business losses.
Meanwhile, the Federal Government’s plan
to raise N120bn ($425m) in bond maturing 2021, 2026 and 2036 last
Wednesday was stalled by system glitch at the CBN.
However, an official of the Debt Management Office said the auction was still ongoing.
The DMO had in a public notice said it
would raise N40bn at par in 2021 bond, while also raising N40bn apiece
in the 2026 and 2036 maturing bonds at the auction.
Meanwhile, the Kenyan shilling is
expected to gradually weaken due to increased corporate dollar demand
this week, heightening the prospects of the central bank intervening by
pumping in dollars.
The Ugandan shilling is expected to be
vulnerable over this week, undermined by a potential rebound in dollar
demand from companies after they’re done meeting their mid-month tax
obligations.
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