From THE WILL
The Nigerian naira Thursday continued its free fall against the dollar at the foreign exchange bureaus, closing at N206-$1 United States dollar. The naira had sold for between N193 – N194 earlier in the week.
Dealers in Lagos, Nigeria’s commercial hub told THEWILL that the market has been very volatile since the Central Bank of Nigeria (CBN) stopped foreign exchange bureaus from buying dollars through commercial banks, in a move to save the naira amidst falling crude oil prices. The dealers were directed to buy directly from the CBN’s own auctions. The bank said the move aimed “to curb speculative demand in the market” or to prevent people from rushing to procure dollars as the naira declines.
The central bank, which has often blamed speculators for naira weaknesses, set a new trading range of N160-N176 against the dollar after its last devaluation of the naira but has struggled to keep the currency in that range.
A news report in The Wall Street Journal quoted economists and traders saying that lumping exchange bureaus together with professional currency traders could have the opposite effect. The central bank’s aim is to limit people’s ability to trade naira for dollars while sentiment is against the Nigerian currency; making dollars harder to come by might make them even more desperate to do so, said Salisu Garu, who operates a foreign exchange bureau in the capital, Abuja. “The policy will further devalue the naira,” he said.
Also, a Reuters report said liquidity conditions have deteriorated as the naira has slumped to record lows because dollar inflows from foreign investment and other sources have dried up.
The central bank is having to intervene and sell dollars into the market, but that is burning up its foreign reserves.
Nigerian currency dealers agreed on Wednesday to halt trading if there is a more than 2 percent intraday slide in the naira over fear the naira could hit N200 – $1.
The crash of the naira puts further pressure on President Goodluck Jonathan, who is seeking re-election in February, in an election that most analyst expect to be very tight