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The naira sustained its slide against the United States dollar on Wednesday, as it weakened to an all-time low on the parallel market where it sold at N1100/$1 for weaker than the N1,060/$1 it traded on Tuesday.
But the nation’s currency traded lower at N1,130 to a dollar for those that demanded wired transfer.
Similarly, on the official Investors and Exporters’ (I&E) window, the nation’s currency fell to N883.56/$ on Wednesday, according to the Central Bank of Nigeria’s data, as against the N775.44/$ it sold the previous day.
The naira depreciation was attributed to persistent dollar shortages in the financial system, and being driven by new demands as import bills rose on 43 unbanned items recently by the Central Bank of Nigeria (CBN).
Also, data from the FMDQ showed that on the official I&E window, the total daily volume turnover yesterday was $69.88 million, which was a sharp decline by 48.04 percent compared to the $134.28 million recorded the previous day.
As of Wednesday, the gap between the parallel market and the I& E FX Window widened further to N216.44 to a dollar, creating more opportunities for arbitrage in the market.
Analysts pointed out that the development gives more naira to government officials, especially the state governors and could encourage reckless spending by some of the governors.
“We may see some state governors who in the coming days because of the excess naira they would get from federation allocation indulge in reckless spending,” the analyst who pleaded to remain anonymous added.
Meanwhile, the highest spot rate observed during the day, according to the FMDQ, was N986/$1, while the lowest spot rate was N701/$1.
Last week, the CBN Governor, Mr. Olayemi Cardoso, emphasised that the apex bank does not have a magic wand to address the myriad of challenges facing the Nigerian economy.
“It must be emphasised that CBN does not have a magic wand that can be waved at the current economic challenges.
“The problems facing the bank are large and complex. However, with focused leadership and sustained reforms, it is expected that over time, the country will gain open economic spaces, attract new investments, create employment, and give our hardworking and talented compatriots an opportunity for a more prosperous future,” he had explained.
According to Cardoso, key factors the central bank under his leadership would be to support the fiscal authorities to achieve a $1 trillion GDP within eight years, moderating inflation, increasing foreign reserves, and the capacity to rebound quickly from economic downturns.
Also, the CBN had last week declared that importers of 43 items previously restricted from accessing foreign exchange (FX) at the official window were now allowed to purchase FX in the Nigerian foreign exchange market going forward.
The central bank had said it would intervene in the foreign exchange market occasionally to boost liquidity, after ending the eight-year ban on the 43 p items that were restricted from accessing dollars on the official market.
It was expected that the move would help stabilise the naira exchange rate. The apex bank in June 2015, had initially included 41 items to the list of commodities which were not-valid to purchase FX from the market, citing the need to conserve the scarce forex and encourage domestic production for self-sufficiency and exports. The list was thereafter expanded to 43 items.Some of the items listed then as not-fit-for forex included rice, cement, margarine, palm kernel products and vegetable oil, meat and processed meat products, vegetables and processed vegetable products, poultry chicken, private airplanes, tinned fish in sauce, roofing sheets wheelbarrows, head pans, among others.
However, in last week’s statement, the CBN Director, Corporate Communications, Dr. Isa AbdulMumin, had said the central bank would continue to promote orderliness and professional conduct by all participants in the FX market segment to ensure that market forces determine exchange rates on a Willing Buyer – Willing Seller principle.
Nine Ekeghe
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