Naira Continues Free Fall Despite CBN Intervention As Demand For Foreign Exchange Increases

• The Nigerian naira is facing lots of pressure in the foreign exchange market, and has started the week on a low note
• Checks show that where the naira closed last week at N1536, it opened this week with an exchange rate of N1,540.57 to the dollar
• The Central Bank of Nigeria is still sustaining interventions to stabilise the naira on the parallel and official markets

Legit.ng journalist Ruth Okwumbu-Imafidon has over a decade of experience in business reporting across digital and mainstream media.

The depreciation of the Nigerian naira has continued, as demand for foreign exchange remains on the rise.

Checks show that the dollar exchanged for 1,540.57 at the official market yesterday, amid increased demand for the US dollars.

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This is despite sustained interventions from the Central Bank of Nigeria (CBN) to keep the naira stable around N1,500/$.

Sources reported that the CBN interventions were not sufficient to meet the increased demand for dollars in the official market.

CBN intervenes to stabilise naira in FX market

Daily Trust reports that the exchange rate between the naira and dollar depreciated by N18.95 in the official market last week, to close at N1,536.89/$.

The FX rate then started the new week at a rate of N1,540 to a dollar, driven by the pressures of rising demand for dollars in the market.

FX sales from the CBN as the week rounded up amounted to $92.10 million, bringing it to a total of $230.90 million in FX sales.

Data from Coronation Merchant Bank showed that CBN accounted for 39.85% of the available FX, while non-bank corporates and exporters accounted for 23.81% and 15.67%, respectively.

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This took a major dip in Nigeria’s foreign reserves, which had only recently seen a slight increase after nine weeks of decline.

The pressures in FX demand have also caused another gap between the official market and the black market, and reports show that the dollar was bought and sold at N1,560 and N1,570 yesterday in the unconventional black market.

The rising demand for dollars may now pose serious threats to the stability of the naira in the official and parallel markets.

Dangote halts naira sale of petroleum products

Recall that Dangote Petrochemical Refinery recently suspended the naira sale of petroleum products like fuel and diesel in Nigeria.

Analysts explain that this decision may not be unconnected with the recent increased demand for dollars, at the expense of the naira.

Petroleum marketers involved in importation also have to hustle for some foreign exchange to also meet their obligations.

Dr. Marcel Okeke, an economist, explained that the halt of naira sales would impact the foreign exchange market more than it would impact the price of petroleum products.

He noted that with the announcement, all marketers would be looking for dollars, whether to buy from the Dangote Refinery or to import from other refineries outside the country, and this would put pressure on the FX market.

CBN Intervention causes dip in FX reserves

In related news by Legit.ng, the CBN recently intervened in the forex market, helping to slow the naira’s depreciation despite rising demand for dollars.

This translated into a dip in Nigeria’s FX reserves, which only increased slightly the previous week, after weeks of declining.

The Treasury bills market saw stable yields, with investors focusing on new auctions, while investor caution in the bond market led to a slight rise in average yields to 18.5%.