Naira, Nigeria’s currency on Thursday fell to an all-time low of N540 per dollar at the unofficial market as demand pressure persists.
This shows a depreciation of 0.93 percent when compared with N535/$ traded on the previous day at the same market, according to data from abokifx.com which many investors regard as the clearest mirror of the free market rates.
Read also: Naira falls to N535 despite rising external reserves
The local currency fell sharply to N525 (from N504) to the dollar on July 28 after the Central Bank of Nigeria (CBN) announced that it would discontinue the sale of dollars to the Bureau De Change (BDC) operators due to foreign exchange infractions.
Naira also weakened marginally by 0.04 percent at the Investors and Exporters (I&E) forex window as the dollar was quoted at N411 67k/$ on Thursday as against N411.50k quoted on Wednesday, according to data from the FMDQ.
Currency traders who participated in the trading session on Thursday maintained bids at between N400.00k and N412.85k per dollar.
Nigeria’s external reserves has in the last one month increased by 2.77 percent to $34.49 billion as of September 6, 2021, compared to $33.56 billion on August 6, 2021, according to the data on the website of the Central Bank of Nigeria (CBN).
“It seems the Special Drawing Rights (SDR) inflow has been received as the foreign exchange reserves added $780m between August 24 and September 9, 2021. The foreign reserves should stay afloat for the most part of September, barring a major outflow,” analysts at Afrinvest Securities Limited said.
The analysts are of the view that the Naira exchange rate is not the major driver of inflation. “Our findings revealed that a 10 percent depreciation of the Naira within one year would only push inflation up marginally by 0.34 percent. Put differently, if the unofficial market exchange rate depreciated further by 10 percent, from N530/US$ to N583/US$, all things being equal, inflation would rise from 17.38 percent to 17.72 percent”, they said.
According to the analysts, the finding is very instructive amidst the significant exchange rate pressure in the alternative market. It allays the fear of a proportional increase in prices as a result of the Naira depreciation.
However, Naira-denominated assets will continue to suffer consistent setbacks in dollar terms. It is, therefore, very important to stress that Nigeria’s inflation is largely traceable to structural challenges, which are mostly domesticated.
At the money market on Thursday, the Overnight (O/N) rate increased by 3.67 percent to close at 13.00 percent as against the last close of 9.33 percent on Wednesday, and the Open Buy Back (OBB) rate also increased by 3.67 percent to close at 12.50 percent compared to 8.83 percent on the previous day, a report by FSDH Research noted.
