Naira slides further against dollar at 313.5

…bank rates surge by 2.9%

The naira has dropped further to 313.5 against the United States dollar at the parallel market on Wednesday as shortage of foreign exchange, especially the greenback, persists in the forex markets.

The local currency which traded for N310 to a dollar just a day earlier closed at N199.40 to the dollar of the interbank market. This came just as the interbank lending rate rose to two per cent from one per cent on Monday, after the Central Bank of Nigeria had directed commercial banks to fund their naira accounts ahead of its intervention in the forex market on today.

The overnight lending rates jumped by 100 basis points as the movement of naira cash for forex purchases drained liquidity in the financial market. The CBN intervenes once a week at the interbank forex market to provide dollar liquidity for some eligible importers.

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The naira had plummeted against the dollar last month after the CBN banned dollar sales to Bureau De Change outlets and later stopped daily sales to the interbank market. The measures were aimed at conserving the nation’s external reserves, which have hit an 11-year low at $28bn.

“The overnight rate went up today to three per cent in the early trade but declined to two per cent after some banks funded their forex accounts,” one dealer said.

The interbank rate mirrors the level of naira liquidity in the banking system. Traders said commercial lenders’ credit balance with the central bank opened at N978bn ($4.94bn) on Tuesday before the bank called for the funding for forex purchases.