Nigerian naira weakens on sudden surge in dollar demand – Reuters

Nigeria’s naira weakened against the dollar on the parallel market on Thursday as speculators took advantage of recent gains to mop up dollars, creating fresh scarcity.

The naira was quoted at 350 to the dollar on Thursday, weaker than its 300 per dollar close the previous day.

ABOVE PHOTO: CBN Governor, Emefiele

The naira remains flat around the 197.50 peg rate on the official interbank market, where the central bank introduced curbs last year on access to dollars as a sharp fall in the value of Nigeria’s oil exports triggered an economic and fiscal crisis.

The currency of Africa’s biggest economy rallied in the week to around 300 a dollar from a low of 400 a dollar after President Muhammadu Buhari on Saturday rejected the idea of devaluing the naira.

But the head of Nigeria’s association of bureau de change operators, Aminu Gwadabe, said “hoarding and speculative activities have returned to the market, pushing down the naira’s value again.”

Another currency trader, Adamu Abdulahi, said demand for the dollar suddenly jumped on Thursday, causing the naira to weaken.

“Many people have been asking to buy the dollar today while not many people are coming to sell to us,” Abdulahi said. – (Reuters)

ELOMBAH.COM COMMENT

As we predicted yesterday, Naira rate to Dollar is climbing again..see the rate as at this afternoon:

25/02/16 $:335/350 £:440/450 Eu:350/360 [Buy/Sell from AbokiFX]

Read our full analysis of the cause of the current Naira panic here:

Naira has never really appreciated as the fundamental of our economy remains the same: CBN’s monthly foreign “receipts” had crashed from $3.2bn to as low as $1.0bn. It becomes immediately obvious why up to N500bn is returned to the banks by the CBN as unmet FX demand each week, why some businesses are warning of shutdowns and why our manufacturing PMI fell to a new low of 44.6 in January.

The gap created by the collapse in the oil price would be far from covered. The balance of payments for the 12 months through to September 2015 shows average monthly outflows on the current account (for goods, services and income) of $7.5bn. If we net off inflows from remittances, the average falls to $5.7bn.

Going by the projection of the Central Bank of Nigeria (CBN), Nigeria’s foreign reserve, which stands at $27.66 billion may deplete further to $18 billion this year.

This is the result from the “risks posed to government revenues – leakages in the oil sector, reduced production, and drop in prices and the dwindling market for Nigerian crude oil.”

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