Naira depreciated by 1.09% to N460 on the parallel market on Monday, days after President Muhammadu Buhari ordered the Central Bank of Nigeria (CBN) to halt dollar sales for importation of foods and fertiliser.
The Naira had firmed dramatically a fortnight ago on the black market following the regulator’s resumption of foreign exchange supply to individuals and investors in a bid to clear a heap of dollar demand.
Yet, sales have been pretty inadequate according to traders, with pressure mounting on the local currency.
Between last year and now, 16.6% of Nigeria’s foreign reserves has shrunken to around $35.77 billion.
Forex liquidity faded out on the spot market after international investors quit the economy in the aftermath of the recent oil crash. But dollar sales by the CBN have been inadequate also.
Turnover on the over-the-counter spot market also called the Investors and Exporters (I&E) forex window plunged from a high of $1.3 billion in February to a low of $3.9 million in August.
On Monday, naira traded at N381 to a dollar on the official market supported by the CBN while it was quoted at N385.83 on the I&E forex window.
“It doesn’t help that some … pronouncement … will likely send more demand to (black) market. These developments put more pressure on the parallel market rates, particularly in the midst of very little supply,” trader told Reuters.