As the currency fluctuated significantly to overshoot the unofficial parallel market rate, Nigeria’s naira fell to a new low against the dollar on Friday on the sparsely traded official market, according to FMDQ Exchange data released on Monday.
According to FMDQ data, the value of the naira dropped as low as 1,421 against the dollar during Friday’s trade, while quotes on the parallel market were close to 1,400 naira. Later, the official market ended with the currency at 891.90 naira.
The most recent decline happened last Wednesday after central bank governor Olayemi Cardoso stated the bank was attempting to increase foreign exchange market liquidity.
The naira has surpassed the record low level it reached on the parallel market, according to Kyle Chapman, FX markets analyst at London-based Ballinger & Co. This could impede the inflow of money required to fix the exchange rate.
Laptops 1000“At this point, the downward cycle is starting to reinforce itself. The deeper the risk premium ingrained in the naira rate, the fewer investors choose to invest in Nigeria, and the farther it falls, according to Chapman.
The central bank has not yet settled outstanding amounts owed in forward trades, which has caused the naira’s official exchange rate to veer closer to the level of the parallel market and exacerbated the West African nation’s dearth of foreign currency.
