Naira Falls Across Markets As CBN Adjust Clearing Rate To N197

The nation’s currency, naira on Wednesday depreciated in valued against the US dollar, across all market segments as the Central Bank of Nigeria (CBN) adjusted its clearing rates to N197/$ from N196.65k/$.

Naira weakened against dollar by N1 or 0.42 percent at the Bureau De Change segment and N1.50k/$ or 0.62 percent at the parallel market.

Consequently, after trading on Wednesday, the local currency closed at N241/$ compared to N240/$ the previous day at the BDC segment and N242.50k/$ as against N241/$ on Tuesday at the parallel market.

At the inter-bank market, naira slide by N0.36k or 0.18 percent against the dollar as it closed at N198.04k/$ compared to N197.68k/$ the previous day according to data obtained from Financial Markets dealers Quotations (FMDQ).

The first half of the year saw continued downward pressure in the Nigerian foreign exchange market as weak macroeconomic fundamentals and political uncertainty took their toll on the value of the Naira. The Naira opened the year at N168/USD at the interbank market segment and depreciated by 17 per cent to N196.95/USD as at June 30, 2015.

Analysts at WSTC Financial Services limited expect the demand pressure in the FX market to persist amid dwindling macroeconomic fundamentals and low fiscal buffer.

“We believe the right course of action by the Apex bank is to allow for a further slide in the value of the Naira. This will boost government earnings and also put a check on the depletion of foreign reserves”, they said.

The CBN adopted the use of both monetary and administrative measures within its regulatory purview to address volatility in the forex market. Measures adopted by the Apex bank during the period include review of the daily maximum open limit of foreign currency trading position up from 0 per cent of shareholders fund unimpaired by losses to 0.10 per cent, further review of the daily maximum open limit of foreign currency trading position up from 0.10 per cent of shareholders fund unimpaired by losses to 0.50 per cent, and Upward review of the 48 hours limit on foreign exchange utilization to 72 hours.

Other measures are Introduction of a two-way order based quote system, Closure of the subsidized official foreign exchange window (the rDAS), a result of which was a 18 per cent de facto devaluation of the Nigerian currency, and Exclusion of 41 import items from accessing funds from any of the Nigerian foreign exchange markets.