BUSINESS
Naira depreciates to 365/$1, closer to convergence rate
The Nigerian currency, over the weekend traded at 365 to the US dollar at the parallel market, against 363 sold on Thursday, indicating drop of two points after recording one naira gain against 364 exchanged on Wednesday at the parallel market.
This is even, as the Central Bank of Nigeria (CBN) took a step during the week under review to unify its multiple exchange rates by allowing banks to use a currency window for investors when quoting the naira rather than the official rate.
The naira, however, weakened on the interbank market, while interbank lending rate rose to 23 per cent on Friday from just five per cent a week ago after the apex bank tightened liquidity.
The local currency, has recorded two naira gains between Tuesday and Thursday, after closing at 365 to a dollar last Monday at the unofficial market, but relapsed on Friday and throughout the weekend to close at 475 to the pound sterling and 425 per Euro, compared to 474 and 423 sold respectively on Thursday at the parallel market.
The Naira at the official forex market, on Friday closed the trading week on a slight positive note, traded at 305.55 per US Dollar, against 305.60 sold the previous day, indicating 0.02 per cent gain, compared to 305.65 sold on the first trading day of the week.
Consequently, the naira at the Investor & Exporter FX widow, opened trading activity on the last trading day of the week at 367.24, showing a drop of 0.09 per cent compared to 366.71opening rate on Thursday, even though it closed at an appreciated rate of 366.44 gaining 0.20 per cent against 368.50 traded the preceding day.
But recorded a decline daily turnover of $95 million against $101 million on Thursday but better than $712.03 settled on Wednesdayand $83.98 million traded the preceding day, data obtained from the FMDQ OTC has revealed.
Meanwhile, the central bank’s sales on Friday amounted to N167.16bn of 356-day open market operation Treasury bills at 18.55 per cent, and N439.45m of the 188-day paper at 17.95 per cent. The total banking credit balance opened at N75bn. But outflows from the system led the market into negative territory, traders said.
“We see the cost of borrowing rising further as the market struggles with tight liquidity and banks seek to cover their positions,” one trader was quoted as saying. Also, FMDQ OTC Securities Exchange, the Lagos-based platform that oversees interbank trading, asked lenders last week to publish quotes reflecting trades in the Investors’ & Exporters’ FX Window, according to Ecobank Transnational Inc. and Access Bank Plc. The window was opened in late April in a bid to attract inflows, so as to boost liquidity in the forex market.
“FMDQ and traders reached agreement to try to move toward a single exchange rate,” a currency analyst at Ecobank has disclosedon Friday. The largest economy in Africa has faced dollar shortages since the price of oil, its main export, crashed in 2014 and the central bank responded by tightening capital controls. As the squeeze worsened, Nigeria opted for a system of multiple exchange rates rather than floating its currency like other crude producers.
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