Naira falls after a one-week gain in the parallel market

The naira fell against the dollar on Monday after gaining 26.24 percent in the parallel market the previous week.

According to the report on BusinessDay.ng, the local currency lost 8.24 percent of its value after trading, with the dollar quoted at an average of N768.33/$, compared to N705/$ on Friday’s black market.

According to traders, the naira’s depreciation was caused by a dollar shortage amid rising demand. In Lagos, the dollar was trading between N750 and N770 per dollar, up from N700 to N710 on Friday’s black market. JAMB Result

The naira was trading at 760-775 per dollar in Abuja and Kano, up from 700-710 last week, BusinessDay.ng reports.

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“Low inflows of foreign investments into the economy in the face of a challenging business environment will trigger further depreciation in the exchange rate due to pressure on the local currency and raises concerns for the central bank,” analysts at Cowry Asset Management Limited said.

Nigeria’s gross external reserves, which provide the Central Bank of Nigeria (CBN) with the means to defend the naira, fell 8.07 percent, or $3.27 billion, over the course of ten months, to $37.25 billion at the start of November, down from $40.52 billion at the start of the year.

Analysts attribute the decline to a decrease in petrodollar inflows into Nigeria’s economy, despite a rally in crude oil prices due to an increase in oil demand since Russia’s invasion of Ukraine in February 2022.

“Despite several initiatives by the Central Bank of Nigeria such as the RT200 programme, the increase in interest rates, clamping down on Bureau De Change, and FX repatriation policies, the Naira vis-à-vis the Dollar keeps depreciating,” analysts at FSDH said in a new report. Dollar to Naira Today

According to the report, the recent policy of issuing new naira notes has exacerbated the currency’s depreciation. While the underlying issue with Nigeria’s exchange rate is a lack of foreign exchange inflows, “we believe that policies by the apex are important tools that influence the movement of the naira.”

The CBN recently announced plans to replace the current N200, N500, and N1,000 notes with new banknotes beginning December 15, 2022.

The naira gained 0.08 percent at the Investors and Exporters (I&E) forex window on Friday, with the dollar quoted at N445.75 versus the previous close of N446.10 on Thursday, according to FMDQ data.

At the I&E window, the naira has fallen by more than 5% this year, to N446.10/USD as of November 10, 2022, from N422.67/USD at the start of the year. In the same vein, Nigeria’s gross official reserves fell by around $866 million in October to $37.37 billion.

Following the difficulties in those markets with FX supply, the CBN has always maintained a culture of intervening in the various foreign exchange markets such as the I&E and Secondary Market Intervention Sales windows.

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Check: Dollar to Naira Today