The sharp and steady depreciation of the Naira at the inter-bank foreign exchange market in the last one week has forced the Central Bank of Nigeria, CBN, to intervene yesterday to stem the slide.
The apex bank was said to have offered about USD5.0 million each to dealers amidst scarcity of foreign currency which had persisted since last week Friday following the sudden withdrawal of CBN’s interventionist resources.
Dealers said the supply from the apex bank saved the Naira from crashing to N350/ USD1 yesterday as the rate was already gone beyond N330 as at mid day before the apex bank’s intervention which relieved the pressure and forced the rate down to less than N310. But the intervention could not save the Naira from further depreciation at the parallel market segment where it traded for N380/ USD as against N375 it closed on Thursday, a development which the dealers said was connected to a perceived pressure on external reserves and CBN’s capacity to continue to be the only supplier in the market.
The local currency has been on a downward spiral since the CBN eventually took away the currency price ceiling it had subtly placed after it officially floated the currency mid last month.
The depreciation in the Naira is also mainly attributed to the lack of supply from CBN following reports that the apex bank had reduced its forex allocations to sales in the interbank market due to other pressing needs for the foreign exchange resources amidst dwindling dollar revenue from oil sales.
Before now, s upplies other than the CBN had avoided the inter-bank forex market over complaints that the official rates did not represent the true value of the Naira against the dollar, hence they find their way to push their dollars to the parallel market segments. According to some dealers international oil firms who are major independent suppliers of forex are now selling part of their hard currency directly to petrol importers under an arrangement with the government.
They, however, explained that they are still looking at what will be a comfortable exchange rate for sellers to come back to the market and that is why the rates kept going up in the past one week.
Last week CBN governor, Godwin Emefiele, flew to Britain and the United States to try to lure back investors into Nigeria’s financial market after nearly one year they left due to CBN’s exchange rate control policy.
It was learnt the trip was unsuccessful as the investors told the CBN team that the market was not yet transparent enough adding that the external reserves level was also uncomforting for them.