The naira fell to a record all-time low of 414 against the United States dollar on Sunday, with currency dealers predicting further pressure in the forex market this week.
The slippery decline of the local currency against the Dollar came barely five days after the Central Bank of Nigeria (CBN) had banned 9 commercial banks from the forex market for failing to remit the Nigerian National Petroleum Corporation (NNPC) $2.334bn into the Treasury Single Account (TSA) in line with President Muhammadu Buhari’s directive last September.
On Friday, the local currency traded at N412 to a dollar as against N407 it recorded on Thursday at some parallel market segments in Lagos and Abuja on Sunday.
This is even as it also traded for N530 to Pound Sterling and N455 against Euro, from N425 and N455, respectively on Thursday.
Quite a number of forex dealers said the pressure on the demand of the dollar, mounted by summer travellers and parents paying schools fees of their children studying overseas, was exacerbated by the CBN’s forex ban on the nine lenders.
The currency dealers said the naira started falling after the CBN banned the lenders from forex transactions.
However, speaking on the free fall of the naira, the Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said:
“There is nothing in the policy environment that will arrest the decline unless the central bank has increased capacity to supply the market, which unfortunately it doesn’t have. So, we should expect the naira to remain under pressure in the coming week.”
According to him, in order for the local currency to stabilise, there must be a funding that the Federal Government or the CBN could access, such as a credit support from either the World Bank or a trading partner like China.
His words: “The decline of the naira against the dollar is beyond the recent suspension of some banks from the forex market. We have witnessed suspension of banks in the past, and it did not lead to any spike in exchange rate. The major challenge we have now is supply shortage. If that improves, naira will stabilise.”
Chukwu further predicted that the naira might hit a low of 420 to the dollar this week.