Naira slides to record low of 420/$1 at parallel market

Naira depreciates against dollar at parallel market
United Bank for Africa

Despite reinstating the nine banks who were suspended from the interbank currency market for failing to remit money owed to the government, by the Central Bank of Nigeria (CBN), the Nigerian currency, the naira, has hit a fresh all-time low of 420 to the dollar at the parallel market.

The apex bank on Wednesday said it had ended the suspension of the nine banks from the interbank currency market for failing to remit money owed to the government.

The reinstatement was announced by Tokunbo Martins, the central bank’s director of banking supervision, who said a payment plan to pass on all outstanding dollar deposits from two state-owned energy companies into a government account had been agreed.

The suspension, imposed last week, came after the central bank tightened restrictions on the flow of dollars to domestic lenders in March.

However, the currency was traded at 418 to the dollar on Tuesday and has been under pressure on the black market for months.

The naira closed at 306 to the dollar on the official window after the apex bank dollar sales, reversing losses in early traded which saw it quoted at 317.09 to the dollar, but fell compared with the 305.50 naira closed the previous day.

But bureaux de change operators raised hope of a gradual appreciation of the local currency in the near term as the central bank licensed 11 new international money transfer operators to address the dollar supply side.

“Depending on the effective implementation of the CBN’s policy, the appointment of new international money transfer operators will ensure that banks will have more dollar to sell to bureaux de change and provide the needed liquidity in the market,” AminuGwadabe president of bureaux de change association said.

Gwadabe said the central bank’s directive that commercial lenders should sell dollar inflow through money transfer operators to bureaux de change has boosted daily dollar supply to the currencies agencies to around $10-$20 million and this could further boost supply and help support the naira.