By Odunewu Segun
Naira suffered another setback yesterday at the parallel market, depreciating by N7 against the dollar, National Daily investigation has revealed.
The exchange rate rose from N268 per dollar on Tuesday to N375 per dollar at the close of business on Wednesday.
This latest depreciation was as a result of the lack of dollar supply in the interbank market that was aggravated by lack of intervention dollar sales by the Central Bank of Nigeria (CBN) causing the naira depreciate by 12 in the market in ten days.
However the naira appreciated yesterday at the interbank spot market with the interbank exchange rate dropping to N294.23 per dollar from N294.57 on Monday.
Banks had been quoting the dollar at N281 to N285. But the lack of liquidity has curbed activity, leaving the central bank as the main supplier of dollars, traders say. On Monday, currency traders introduced a maximum resale premium on dollar trades to try to boost liquidity after a transaction made without spreads sent the naira tumbling to a record intra-day low.
Investors have welcomed the removal of currency controls but many are still steering clear until Africa’s biggest economy shows signs of a concrete recovery. “Most investors would like to see a more liquid FX market before resuming purchases of local assets,” said Samir Gadio, head of Africa strategy at Standard Chartered Bank.
“Given the significant discount of naira-settled futures, a number of offshore financial institutions and hedge funds could be tempted to get involved in the foreseeable future.” A total of $579.3 million has been sold in futures contracts ranging between one month and one year. A one-month contract for $26.7 million due on July 27 was sold at 279 naira.