Naira on Thursday depreciated across foreign exchange (FX) markets, as the Central Bank of Nigeria (CBN) says it would not be focusing on the thinly-traded parallel market when determining exchange rate.
Naira weakened against the US dollar by N5 or 2.17 percent at both the parallel market and Bureau De Change segment of the FX market.
After trading on Thursday, the local currency closed at N235/$ as against N230 on Tuesday at the parallel market and N237/$ compared with N232/$ traded on Tuesday at the BDC, BusinessDay survey has revealed.
At the inter-bank FX market, naira slide by N0.14k against the dollar closing at N197.54k from N197.40 the previous day, data from Financial Markets Dealers Quotations (FMDQ) have indicated.
“There is need to de-emphasise the parallel market. How can less than 1 percent be determinant of the rate? Most of those going that way are those that don’t want to be documented,” CBN spokesman, Ibrahim Muazu, told Reuters.
The central bank, worried about rising inflation, has said it is in no mood to devalue the naira again, after it tightened access to hard currency for the import of a wide range of goods. Since the measures, the naira has weakened steadily on the black market.
Analysts say the measures risked diverting dollar demand to the black market, worsening investor perceptions about policy in Africa’s biggest economy and delaying a decision to devalue the naira to fully reflect weak prices for Nigeria’s oil exports.
Aminu Gwadabe, president, Nigeria’s Bureau de Change Association, told Reuters that people were buying dollars on the parallel market to protect themselves against further naira weakness.
Muazu said the official inter-bank market had the capacity to handle legitimate dollar transactions but that people preferred to use the unofficial parallel market for undocumented transactions.
The central bank has spent about $5 billion since January defending the naira, hit by last year’s plunge in oil prices.
On Wednesday, the central bank said its FX reserves had started to recover gradually with its management of dollar demand and government’s effort to plug all leakages.
Spot reserves stood at $31.89 billion on July 7, the spokesman said, however, the central bank’s moving average data showed reserves at $29.63 billion on July 7.
