It is probable that the naira will stay under sustained pressure from the United States dollar on the parallel market in the week ahead as demand shifts to the unofficial market amidst a perennial forex crunch now worsened by a central bank’s directive this week, halting processing of new trade documents for importation of corn, traders told Reuters on Thursday.
Naira is quoted on the black market at 470 relative to 465 per dollar at the previous session. Last week, the apex bank weakened the local currency by 5.5% to 380 naira on the forex retail market, almost at par with the rate offered by the over-the-counter spot market alternatively known as the Investors and Exporters (I&E) window.
Nigeria runs a multiple exchange rates regime and the regulator has been compelled by the World Bank and the International Monetary Fund to consolidate the rates around that of the I&E segment to qualify for budget-support loans and by government to enable it to get more naira for its oil receipts.
READ ALSO: Naira remains stable against dollar at forex markets despite liquidity crunch
Analysts also believe that rate harmonisation will help win back many foreign investors who exited the economy following the coronavirus outbreak.
The Central Bank of Nigeria this month merged its exchange rates to curb foreign exchange shortfalls that have beset the nation for months, dealers said, noting that dollar supplies were yet to improve.
A meeting of its Monetary Policy Committee is due next week where further reforms regarding the direction of the financial system in the next few months will be decided.
Opinions