The
Central Bank of Nigeria (CBN) yesterday allowed the Naira to suffer its
biggest official depreciation since November 2011, as the currency
depreciated by 54 kobo at the official foreign exchange market.
This
followed the continued decline in the nation’s external reserve, as the
foreign exchange market defied all efforts of the apex bank to curtail
foreign exchange demand and restore confidence in its ability to defend
the Naira.
At the Bi-weekly Retail Dutch Auction
System (RDAS) session conducted yesterday by the CBN, the official
exchange rate rose to N156.39 to the dollar from N155.85 at the previous
session conducted on Monday. This translated to 54 kobo depreciation of
the Naira against the dollar, and the largest in three years.
Until
last month the CBN had fiercely defended the Naira, maintaining the
official exchange rate at the N155.75 since April 2013. But following
increasing decline in the nation’s external reserves, rising demand for
foreign exchange occasioned by foreign investors divesting from the
country in response to decline in price of crude oil, the apex bank
started depreciating the Naira at the official exchange market.
On
October 15th, it depreciated the Naira by one kobo, and by two kobo on
the 3rd and 5th of November. On Monday, November 10th, the CBN allowed
the Naira to depreciate by five kobo and then yesterday by 54 kobo. The
last time the CBN allowed the naira to depreciate more than 50 kobo at
the official market was on 28th of November 2011.
But at the
interbank foreign exchange market yesterday, the CBN intervened to halt
the depreciation of the Naira, with the interbank exchange rate rising
to N168.6 to the dollar on Tuesday from N165.8 last Friday. To halt this
trend, the CBN conducted special dollar sales to banks, which caused
the interbank exchange rate to fall to N167.6 to the dollar yesterday
translating to N1 appreciation for the Naira.
Meanwhile, experts
have predicted further depreciation for the Naira, saying a sharp
devaluation is inevitable. “The markets are starting to see the blood
here,” said Emad Mostaque at Eclectic Strategy, a consultancy set up by
former Deutsche Bank veteran, John-Paul Smith.
“We are now
entering a particularly dangerous period for the Naira as time
constraints and low resources to fight against speculative attack make
the currency vulnerable,” he said. “Everything is lining up for that
currency attack.”
Bank of America Merrill Lynch analyst Oyin
Anubi said his clients – U.S. equity investors – feared that as sinking
oil prices deplete Nigeria’s war chest, a sharp correction is ahead:
“Naira devaluation is fast becoming consensus,” he wrote in a note.
Credit: Babajide Komolafe/Vanguard
No comments:
Post a Comment