The rate at which the naira, is depreciating against the dollar shows that it could fall to N1,000/$ before the end of next month, traders said Tuesday.
According to the traders, this is due to a shortage of the greenback, with the attendant naira free fall, which intensified after the Central Bank of Nigeria (CBN) announced plans to redesign the banknotes.
After trading on Tuesday, the naira closed at an average rate of N822.5 per dollar at the parallel market across the country. This represents 2.74 percent depreciation compared to N800 closed on Monday.
A breakdown of the exchange rate across the country’s street markets shows that the dollar was quoted at N820 in Kano and Festac, Lagos, while it was exchanged at N825 in Abuja and Apapa, Lagos.
“It will get to N1,000 before the end of the year, the reason being that there is a lot of fraud and corruption in the system,” said Andrews Elueni, managing director, of Flawless Capital Limited.
Speaking with BusinessDay by phone he said, “We have to determine the kind of economy the CBN is running. How can they sell dollars at N443 at the official market, and at the black market, which is the real rate, it is quoted at N822. Who is getting the dollars? What are they doing with it?”
Nigeria’s Central Bank last week announced plans to introduce new banknotes to replace the current N200, N500 and N1,000 Notes with effect from December 15, 2022.
Some initial speculation against the naira is expected following the announcement but this should be short-lived, according to Financial Derivatives Company (FDC).
In times of uncertainty, investors, speculators and manufacturers will prefer to be long in dollars and short in domestic currencies”, analysts at FDC said in a report.
At the Investors and Exporters (I&E) forex window, Naira depreciated by 0.68 percent as the dollar was quoted at N446.00 on Tuesday as against the last close of N443.00 on Monday, data from the FMDQ indicated.
Most currency dealers who participated at the foreign exchange auction on Tuesday maintained bids between N424.00 (low) and N447.00 (high) per dollar.
The daily foreign exchange market turnover declined by 16.66 percent to $51.58 million on Tuesday from $61.89 million recorded on Friday.
At the money market on Tuesday, the Overnight (O/N) rate decreased by 5.33 percent to close at 9.83 percent as against the last close of 15.16 percent on the previous day, and the Open Repo (OPR) rate decreased by 5.17 percent to close at 9.33 percent compared to 14.50 percent on Monday.
With Open Market Operation (OMO) repayment of N20.00 billion, the money market rates are likely to remain at current levels in the near term, barring any mop-up activity by the CBN, analysts at FSDH said.