Naira continues its depreciation against the dollar as it fell by 1.5 per cent to a new low of N265 to the United States dollar on the unofficial market yesterday after the Central Bank of Nigeria (CBN) rationed dollar supplies this week.
The Central Bank cut the amount it sold to each of the 2,270 retail money exchange brokers that participated in the weekly sale to $10,000, down from the $30,000 each it sold last week.
Experts argued that the situation may likely continue in 2016 as the N6 trillion budgets would make impossible to hold the exchange it. While the naira is all but fixed at N198-N199 per dollar, prices of forwards suggest traders expect it would weaken 10 per cent to N221 in three months and 23 per cent to N258 in a year.
Unlike other oil exporters such as Russia and Colombia, which have let their currencies depreciate, Africa’s biggest economy has starved banks and their customers of foreign exchange in an attempt to prop up the naira.
The black-market rate used by exchange bureaus fell to a record N260 per dollar last week amid soaring demand for the U.S. currency. It hit N165/$ yesterday. Foreign stock and bond investors have fled the country in anticipation of devaluation.
A record N6 trillion ($30 billion) budget for 2016, and the prospect of more borrowing to pay for it, would increase demand for imports and swell the amount of local currency in circulation, making it harder to hold the exchange rate, according to Credit Suisse Group AG and Investec Ltd.