Naira Reverses Gain, Drops To 490/Dollar

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Naira Reverses Gain, Drops To 490/Dollar

The naira fell against the United States dollar from 485 to 490 at the parallel market on Wednesday, reversing part of the gain it had recorded against the greenback last week.

The local currency, which had fallen to 495/dollar last Thursday, recorded some gains and closed at 485/dollar on Friday.

Since Friday when the Christmas holiday was announced, the naira closed at 485/dollar at the parallel
market.

On Tuesday, three days to the end of the year, the naira traded flat and was sold for 485 per dollar on the streets of Lagos and Abuja.

Currency experts have predicted the naira will weaken against the greenback as the New Year approaches.

Specifically, they said the naira might fall to 500/dollar this week.

Last Monday and Tuesday, the naira traded flat at 490 after closing at 487/dollar the previous Friday.

The naira has been under severe and continuous pressure as the scarcity of the US currency continues to create ripples in the financial markets and economy.

The naira plunged to 470/dollar, down from 455/dollar on the back of dollar shortage at the official and parallel forex markets some weeks ago.

The naira has, however, consistently closed around 305.5 a dollar level since August via the official window.

A Director at Union Capital Markets, Mr. Egie Akpata, said it was really difficult to predict the direction of the naira currently because part of the currency market had shut down for the year.

You can’t really predict the market now because part of the market has shut down for the year. Things will really take shape next week. Currently, it could swing anywhere.”

Currency dealers said the consistent clampdown on black market operators by security agents had compounded the naira problem, putting more pressure on available dollars.

The CBN had on June 20 lifted its 16-month-old naira peg, following overwhelming dollar demand from companies and calls for a free floating of the naira by industry experts.

Experts, however, argued that the central bank had yet to fully allow the naira to float freely.

The CBN has struggled to support the naira as the country’s external reserves continue to fall.

Dollar shortages have caused many companies to halt operations and lay off workers, compounding an economic crisis exacerbated by the fall in global prices of oil, which accounts for over 70 per cent of Nigeria’s budget revenue.

Meanwhile, the Bureau De Change operators are now getting $8,000 each per week against the usual $15,000 each per week.

Economic and financial experts said unless the lingering dollar supply problem was abated, the volatility in the exchange rate and the consequent economic challenges might continue.

However, the currencies of Uganda, Kenya and Zambia are seen trading sideways this week as most investors closed positions ahead of the end of the year, according to a Reuters report.