By Odunewu Segun
The naira dropped to N382 against the United States dollar at the parallel market, down from the N380 it recorded last Friday. While it closed at N316.37 against the dollar at the interbank market.
Analysts had predicted that the naira would weaken further against the dollar this week owing to limited dollar supply as foreign portfolio investors continued to stay on the sidelines until the Nigerian economy showed signs of recovering from the impact of currency controls.
“The market still lacks enough liquidity, we need to do more to boost liquidity. The current rate is a measure of the amount of dollar liquidity at the interbank market,” a currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said.
The Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said, “We are in a very challenging situation as a country and the CBN needs to do something urgently to stabilise the exchange rate at the interbank market.
“If the CBN fails to intervene, the naira may fall further against the dollar at the interbank market. If it does, the naira may appreciate to say about 310 to the dollar. But the point is that the market needs sustained intervention until there is a calm that will assure the foreign investors that things are now normal.”
A research analyst at FXTM, Mr. Lukman Otunuga, noted that the elevated concerns over a potential technical recession in Nigeria had forced the CBN to relinquish its naira peg.
“With the parallel and official markets potentially closing the gap as the naira floats, liquidity could increase as investors send their dollars to the official exchange. As of now, the naira could depreciate further as a combination of rising US Fed rate hike expectations and ongoing fears over the domestic economy encourage investors to install another round of selling,” he said.
The naira has been under a persistent pressure as dollar scarcity continues to weigh on the local currency at both the parallel and interbank forex markets. It opened at 315 to the dollar and weakened to 324 before the central bank intervened to help the currency close at 316.37.