Naira Weakens To 230 As Dollar Demand Rises

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The Naira and dollar

The Nigerian naira reversed its gains against the dollar on the parallel market on Tuesday on increased demand for the United States currency from some importers, traders said.

The naira fell to 230 against the dollar on Tuesday, weaker than the 216 it recorded on Monday. It was quoted at 245 over a week ago.

On the official interbank market, the naira traded at 199 to the dollar, unchanged from the previous day and near the Central Bank of Nigeria’s pegged rate of 197.

The naira had firmed on the parallel market after lenders stopped accepting cash deposits in dollars, a move to discourage speculation on the currency.

“We have seen increased demand for dollars again by some end-users taking advantage of the gains recorded in the past few days,” a Bureau de Change operator, Harrison Owoh, toldReuters.

There was concern that the naira gain on the black market would be short-lived, triggering a surge in dollar buying.

The naira had weakened on the parallel market to as much as 242 to the dollar last month, on persistent dollar demand after the CBN last month limited importers’ access to dollars on the official interbank market to buy a wide range of goods, in order to save its reserves.

The Acting President, Association of Bureau De Change Operators, Alhaji Aminu Gwadabe, said unless there is a moral suasion move by the CBN to players in the market in coming days, the situation might go out of hand.

“The gain recorded by the naira in recent days was by fiat and not by market forces. And such fiat cannot be effectively used to stabilise exchange rate in an open economy with comatose industries like Nigeria,” he added.

It was learnt that demand for dollars was rising despite banks decision to reject cash dollar deposit.

“As we speak, all the banks have stopped collecting cash deposit of dollars and other foreign currencies. Previously, a few of them were collecting; but none of them is collecting,” Gwadabe added.

The naira had weakened at the parallel market to as much as 245 to the dollar on persistent dollar shortages some weeks ago.

The Head, Investment and Research, Afrinvest West Africa, Mr. Ayodeji Ebo, had on Monday said the gain the naira was recording was good for the economy as it would help the CBN to gauge the true value of the naira in the event of a possible devaluation in the near future.

“If there is a convergence between the interbank and parallel market, the CBN may possibly review its restrictions imposed on the forex market,” he added.
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