Naira remains 490/$1 at parallel market

Contrary to some financial analysts’ prediction that the Naira would hit 500 per dollar before the New Year, the currency has remained steady at N490 against the dollar.

The naira has maintained the N490 per dollar rate it traded on the last day of 2016 and has held steady for the first two days of 2017 on the parallel market segment of the foreign exchange market.

The local currency closed at 490 to the dollar on Friday, from 495 against the dollar last Friday at the parallel market.

At the official interbank window, the naira was quoted at 310.25 to the dollar on Thursday, but it was expected to close at around 305.25, the same level it has traded since August.

However, currency dealers believe that the naira may depreciate against the dollar by the time more businesses resume operations on 3 January 2017 from the holiday, as dollar liquidity remains thin in the market.

The naira has been under severe and continuous pressure as the scarcity of the US currency continues to create ripples in the financial markets and economy.

However, with the closing rate of the naira in 2016, it has shown that the currency beat analysts’ expectation, as it was sold on the streets of Lagos, Ogun and Abuja at 490/dollar throughout the holiday.

A director at Union Capital Markets, Mr. Egie Akpata, said it was really difficult to predict the direction of the naira shortly before the New Year because part of the currency market had shut down for the year.

“You can’t really predict the market because part of the market had shut down for the New Year. Things will really take shape this week,” he said.

Also, on Thursday, the naira closed at 490 to the dollar, the same level it closed on Wednesday. Although, it fell against the greenback from 485 to 490 on Wednesday, reversing part of the gain it recorded the previous week.

The CBN had about two weeks ago sold about $1billion on the forward market to clear a backlog of dollar obligations in selected sectors.

Outstanding dollar demand was about $4 billion before June when the 16-month-old peg was removed. Efforts to cut dollar demand have been largely unsuccessful due to low oil prices.

Traders said the CBN told banks to prioritize airlines, manufacturing firms, petroleum products importers and agriculture sectors, the sectors worst hit by the dollar shortage, in the auction.

Some weeks ago, the naira plunged to 470/dollar, down from 455/dollar on the back of dollar shortage at the official and parallel forex markets.

The naira has, however, consistently closed around 305.5 a dollar level since August via the official window.

The CBN had on June 20 lifted its 16-month-old naira peg, following overwhelming dollar demand from companies and calls for a free floating of the naira by industry experts.

The Chief Executive Officer, Financial Derivatives, Mr. Bismarck Rewane, said there was a need to overhaul the foreign exchange market and policies, in order to stabilize the forex market.

“The current state of the forex market in Nigeria must be reformed and completely overhauled. If you don’t do that, no matter what happens you are not going to get the results you want,” he said.