Africa Business Economy Money

Nigeria’s naira briefly drops to record low on official market

Yoopya with Reuters

Nigeria’s naira briefly slumped to a record low against the dollar in thin trading on the official market on Thursday, bringing the official exchange rate within touching distance of the parallel market rate.

Nigerian naira
A man counts Nigerian naira notes in a market place in Yola, Nigeria, February 22, 2023. REUTERS/Esa Alexander/File Photo

The currency of Africa’s biggest economy fell as low as 1,105 naira to the dollar from 830 at Wednesday’s close, LSEG data showed, before recovering to trade firmer on the day around 800 to the dollar.

A central bank spokesperson did not respond to a request for comment on the naira’s fall or its plans for the currency when contacted by Reuters.

The naira’s official exchange rate has been drifting towards the parallel market level for the past two weeks, traders said.

The naira was quoted at 1,135 to the dollar on the parallel market on Thursday, while lenders had been quoting the currency within a range of roughly 750 naira to 990 naira on the official market before Thursday’s trade.

“We suspect this is an anomalous rate in a liquidity squeeze due to increased demand in the I&E window (official market), and don’t expect this to be reflective of a true market rate going forward,” said Kyle Chapman, FX markets analyst at London-based Ballinger & Co.

Olayemi Cardoso, the central bank governor who took office in September, has been silent about where he wants to see the trading band for the naira or when further liquidity might be injected into the market.

The central bank has not intervened on the official market since October, which has helped accelerate the naira’s slide, traders said.

Last week the naira recovered from a record low of 1,300 on the parallel market after the central bank sold dollars to 14 lenders to clear outstanding currency forwards. Some other lenders are yet to get settlement.

The government has said it is expecting $10 billion in foreign currency inflows that will improve market liquidity, but it is not clear when those funds will arrive.

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