Naira falls by 0.63% to N480 on strong demand for dollar

Nigeria’s currency on Tuesday depreciated by 0.63 percent as the dollar traded at N480, weaker than N477 traded on Monday on the black market.

The naira depreciation was attributed to strong demand for dollar by the end users to meet their obligations. The foreign exchange market has been under pressure since March 2020 following a sharp drop in oil prices as a result of Covid-19 pandemic.

At the parallel market and the Bureau De Change (BDC) segment, naira steadied at N475 per dollar on Tuesday.

Naira strengthened at the Investors and Exporters (I&E) forex window by 0.13 percent, as the dollar was quoted at N394.00k on Tuesday, stronger than N394.50k quoted on the previous day.

The daily foreign exchange turnover, increased significantly by 158.41 percent to $108.34 million on Tuesday from $39.99 million recorded on Monday, data from FMDQ show.

On the external reserves position, the Monetary Policy Committee (MPC) at its just concluded two day meeting, noted the increase in the level of external reserves, which stood at US$36.23 billion as at 21st January, 2021 compared with US$34.94 billion at the end of November 2020.

This reflected improvements in crude oil prices, partial global economic recovery amid optimism over the discovery and distributions of COVID-19 vaccines by most developed economies.

The Central Bank of Nigeria (CBN) on Tuesday, retained its Monetary Policy Rate (MPR) at 11.5 percent amid a difficult recession – citing a more pressing concern of inflation.

Lukman Otunuga, Senior Research Analyst at FXTM, said while central banks across the globe have embraced looser monetary policy to defend their respective economies against Covid-19, the CBN simply does not have enough breathing room. Given how inflation remains well above the 6-9% target, a rate cut could fuel inflationary pressures – ultimately impacting economic growth.